Factors Determining Poverty And Inequality In India By Tarun Das

Quantitative ModelingPart-3 Factors Determining Poverty in India Presented by

Dr Tarun Das

1.1 Improvement in Human Development • Poverty ratio declined: from 39% in 1987-88 to 36% in 199394, further to 26% in 1999-2000.

• Infant Mortality rate declined: from 94 in 1988 to 70 in 2001 • Literacy rate improved: from 52% in 1991 to 65% in 2001 • Real wages for farm labour had an increasing trend in 1990s. 2

1.2 Husehold Distribution by income Classes (% to total) NCAER

70 60 50 40 30 20 10 0 1985-86

1989-90

1992-93

L

1995-96

LM

14 12 10 8 6 4 2 0 1985-86

1989-90

M

1992-93

UM

1995-96

H

III. The Potential in the Next Decade

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NCAER

Percentage

100

C o m p o s it io n o f H o u s e h o ld s b y In c o m e C la s s e s : ( 1 9 9 4 - 9 5 P r ic e s ) ( 1 9 9 4 - 9 5 t o 2 0 0 6 - 0 7 ) H

75 50

UM M LM

25 0

L

1 9 9 4 -9 5 2 0 Households 0 1 -0 2 2 0 0 6 -0 7

Note: L= LT 22500; LM=22501 TO 45000;M=45001 TO 70000; UM=70001 TO 96000; H=GT 96000; * = Estimated

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III. The Potential in the Next Decade

NCAER

Percentage

100

C o mpo s itio n o f H o us eho lds by Inc o me C las s es (1985-95 to 2006-07)

75 50 25 0 19 85-86

1994-95 L

200 1-02 M

2006-07 H

Note: H= GT 106000; M=25001 TO 106000;L= LT 25000; * = Projected HHD SR= Household Savings Rate

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III. The Potential in the Next Decade

NCAER

Million Households

160 140 120 100 80 60 40 20 0

H O U S E H O L D S B Y IN C O M E C L A S S E S 1 4 0 .4 1 1 2 .1

8 6 .1

6 9 .9

5 5 .3

3 5 .5

4 .6

1 3 .2

1994-95

2001-02*

Note: H= GT 106000; M= 25001 TO 106000 L= LT 25000; * Projected

L

2 3 .2

2006-07*

M

H 6

III. The Potential in the Next Decade

2.1 Determinants of Poverty at the Macro Level

Potential • Per cap 7

2.2 Determinants of Poverty at the Macro Level

Other Po ratio: 8

2.3 Linear Regression at Macro Level Independent variables Constant Per capita national income Growth rate of real GDP at factor cost Growth rate of population Inflation rate based on WPI Gross fiscal deficit as percentage of GDP Share of social sectors in central govt. expend. Literacy rate Expectation of life Growth rate of agricultural GDP Share of service sectors in overall GDP Share of private sector in overall GDP Share of private sector in gross domestic invest. Gini ratio for consumer expenditure Time (1977-78=1) R squared No. of observations

Equation-1 Coefficient t-statistic 425.9 -0.002 2.58 0.027 0.84 2.740 4.49 0.008 0.38 0.123 1.60 -1.358 4.78 -1.407 6.02 -7.281 5.51 -0.018 1.28 -0.466 2.34 0.217 1.25 -0.067 3.42 43.801 4.16 -6.929 6.31 0.999 23

Equation-2 Coefficient t-statistic 456.1 -0.002 5.11 3.049

5.38

0.085 -1.39 -1.26 -7.68

1.11 5.11 7.38 5.86

-0.54

4.21

-0.07 44.06 -6.96

4.18 4.11 6.34 0.999 23

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2.4 Linear Regression at Macro Level

Independent variables Constant Per capita national income Gini ratio for consumer expenditure Time (1977-78=1) R squared No. of observations

Equation-3 Coefficient t-statistic 47.861 -0.002 3.25 29.813 1.96 -0.540 4.51 0.985 23

Equation-4 Coefficient t-statistic 41.594 -0.004 24.81 82.290 3.27 0.969 23

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2.5 Log-Linear Regression at Macro Level Independent variables (Log of)

Constant Per capita national income Growth rate of real GDP at factor cost Growth rate of population Inflation rate based on WPI Gross fiscal deficit as percentage of GDP Share of social sectors in central govt. expend. Literacy rate Expectation of life Growth rate of agricultural GDP Share of service sectors in overall GDP Share of private sector in overall GDP Share of private sector in gross domestic invest. Gini ratio for consumer expenditure Time (1977-78=1) R squared No. of observations

Equation-1 Log-Linear

Equation-2 Semi-log

Log of Poverty ratio as the Dependent variable

Poverty ratio as the Dependent variable

Coefficient t-statistic 41.43 -0.651 5.59 0.003 0.73 0.021 1.96 0.014 3.08 0.025 1.87 -0.043 1.98 -3.979 9.00 -3.622 3.17 -0.003 0.83 -1.078 5.79 0.190 0.61 -0.052 2.04 0.161 1.95 -0.139 6.50 0.999 23

Coefficient 1290 -7.07

t-statistic

1.88

1.96

1.09 -0.90 -114 -156

0.44 8.06 3.44 1.95

-31.6

5.77

-3.56 8.68 4.32

3.23 1.96 4.92

2.69

0.999 23

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2.6 Log-Linear Regression at Macro Level

Independent variables (Log of) Constant Per capita national income Gini ratio for consumer expenditure Time (1977-78=1) R squared No. of observations

Equation-3 Semi-log Coefficient t-statistic 144.99 -10.82 1.98 3.386 1.95 -0.592 3.53 0.980 23

Equation-4 Semi-log Coefficient t-statistic 317.96 -29.79 24.41 14.20 1.96 0.968 23

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3.1 Log Linear Regression at State Levels (Panel Data) Independent variables (log of) Constant Time (catch-all variable, 1983=1) Per capita consumption expenditure Rate of unemployment Literacy rate Expectation of life Old-age dependency ratio Gini ratio for consumer expenditure Degree of urbanisation R squared No. of observations

Rural sector Coeffitcient statistic 30.454 0.060 0.93 -0.019 6.82 0.247 2.57 0.612 1.96 -6.453 3.93 0.773 2.21 1.346 2.81 -0.380 2.12 0.856 68

Urban sector Coeffitcient statistic 15.164 -0.007 0.16 -0.023 9.50 0.004 1.97 0.926 1.55 -3.429 2.45 0.121 0.51 0.150 1.97 0.466 4.93 0.793 68

Combined Coeffitcient statistic 19.34 -0.016 0.46 -0.016 7.43 0.212 2.80 0.265 1.09 -3.037 2.74 -0.837 2.60 0.629 2.00 0.032 1.98 0.831 68

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3.2 Log Linear Regression at State Levels (Panel Data) Independent variables (log of) Constant Time (catch-all variable, 1983=1) Inequality adjusted pc consum. Exp Rate of unemployment Literacy rate Expectation of life Old-age dependency ratio Degree of urbanisation R squared No. of observations

Rural sector Coeffitcient statistic 25.183 0.027 -0.030 0.242 0.574 -5.674 0.901 -0.272 0.864 68

0.49 8.42 2.62 1.91 3.59 2.26 2.01

Urban sector Coeffitcient statistic 20.233

Combined Coeffitcient statistic 19.574

-0.022 -0.029 0.046 0.861 -4.616 0.237 0.311 0.780 68

-0.016 -0.022 0.211 0.244 -3.334 0.775 0.043 0.820 68

0.54 9.51 1.53 1.41 3.42 1.95 3.65

0.45 8.56 2.77 1.01 3.06 2.47 2.17

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3.3 Log Linear Regression at State Levels (Panel and Pooled Data Independent variables (log of) Constant Dummy (0 for Urban, 1 for National, 2 for Rural) Time (catch-all variable, 1983=1) Per capita consumption expenditure Inequality adjusted per capita consump. Exp. Rate of unemployment Literacy rate Expectation of life Old-age dependency ratio Gini ratio for consumer expenditure Degree of urbanisation R squared No. of observations

Equation-1 Coefficient t-statistic 26.290 -0.298 4.66 0.125 0.12 -0.017 9.91 0.241 0.295 -5.465 0.448 0.649 0.119

4.07 1.40 5.74 2.21 2.50 2.12 0.710 204

Equation-2 Coefficient t-statistic 24.833 -0.271 5.42 0.093 0.93 -0.025 0.227 0.328 -5.280 0.367

12.19 3.96 1.61 5.94 1.96

0.108

1.98 0.727 204

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3.4 Log Linear Regression at State Levels (Panel and Pooled Data Independent variables (log of)

Equation-1 Coefficient t-statistic Constant 38.18 Dummy (0 for Urban, 1 for National, 2 for Rural) -0.241 3.50 Time (catch-all variable, 1983=1) 0.226 4.37 Per capita net state domestic product (NSDP) -0.658 7.18 Inequality adjusted per capita NSDP Rate of unemployment 0.117 2.09 Literacy rate 0.823 3.39 Expectation of life -8.161 8.51 Old-age dependency ratio 1.019 4.76 Gini ratio for consumer expenditure 0.861 3.07 Degree of urbanisation 0.005 2.00 R squared 0.685 No. of observations 204

Equation-2 Coefficient t-statistic 33.307 -0.337 6.06 0.094 2.40 -0.0006 0.160 0.575 -8.393 .243

8.76 2.46 2.47 8.92 6.53

0.076

2.01 0.690 204

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Thank you Have a Good Day

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