Poverty and Vulnerability in Developing Countries

AbstractThe University of ManchesterMd. Shafiul AzamDegree of Doctor of PhilosophyPoverty and Vulnerability in Developing Countries2011The dissertation comprises of three self-contained papers. The common theme of all the papers is to estimate and examine the broader issues of rural poverty and vulnerability in developing countries. A variety of micro-econometric techniques were used depending on the context and objectives of the papers.The first paper estimates ex ante poverty and vulnerability of households in Bangladesh using Household Income and Expenditure Survey (HIES) data 2005. We use a simple two-level random intercept model to estimate consumption variance due to idiosyncratic and covariate shocks. Our results show that poverty is not same as vulnerability as a substantial share of those currently above the poverty line is highly vulnerable to poverty in the future. The study finds that those without education or agricultural households are likely to be the most vulnerable. The geographical diversity of vulnerability is considerable. It is suggested that ex ante measures to prevent households from becoming poor as well as ex post measures to alleviate those already in poverty should be combined. The second paper examines whether microfinance reduces poverty in Bangladesh drawing upon 4 rounds of household panel data covering the period 1997 to 2005. We estimate the effects of general microfinance loans as well as loans for productive purposes on three different welfare measures- household income, food consumption and women? s Body Mass Index (BMI) employing a number of methods including DID-PSM and Household Fixed Effects Model. The results of Propensity Score Matching (PSM) applied for each round show mostly positive effects of MFI? s general and productive loans on income and food consumption before 2000, but these turned negative in 2004, whilst the results of DID-PSM confirm a positive impact of MFI? s general loans on food consumption? s growth in 1999-2004. It has been found by household fixed-effects model that overall effects of MFI? s loans on income and food consumption in 1997-2004 were positive and that the purpose of the loan is important in predicting which welfare indicator is improved.Finally, the third one explores the key causal factors behind agricultural supply response and farmers' market participation decisions in Cambodia. A stylized farm household model with market imperfections is considered and a two-step decision making process is outlined. Farmers decide, first, whether or not to participate in the market and then they decide how much to sell. The model is estimated using a Heckman type regression approach. We compute the marginal effects for the full sample as well as for small and large holders. Non-price factors such as risk, technology and rural infrastructure come out as important determinants of commercialization of agriculture in Cambodia. The marginal effects for the small and large holders differ substantially both in quantitative and qualitative terms. This suggests differential treatment in terms of intervention and incentives for small and large holders would be more effective to promote market access.