# **2. Poverty Trends and Poverty Convergence**

Creating a data set to analyze regional poverty merits acknowledgement and discussion. As recent as early 2015,<sup>7</sup> publicly accessible data sets of Turkey’s Household Income, Consumption and Expenditure Survey (HICES) and the Survey of Income and Living Conditions (SILC) did not have regional variables at the NUTS2 level. Econometric techniques were employed to impute welfare measures at the NUTS2 level.

## **<u>Poverty</u>**

Turkey has experienced a large amount of poverty reduction (consumption based) in recent years (Azevedo and Atamanov, 2014). However, most of what we know about welfare, poverty, and shared prosperity is limited to the national level. NUTS2 regional level poverty and welfare measures used in this paper are computed using survey-to-survey imputation methods. Data access limits which data set can be used to analyze poverty. The Turkish Statistical Institute (TUIK) has been conducting three nationally representitive surveys anually since 2005; the Household Income and Consumption Expenditure Survey (HICES), the Survey on Income and Living Conditions (SILC) and the Labor Force Survey (LFS). However the HICES, which is the national survey that is used to measure poverty, does not have geographic identifiers. The SILC contains geographic identifying variables, but only at the NUTS1 level.

Table 1. Survey Comparison and Data Availability

||Years Available|Income or Consumption|Geographic Identifier|Spatial<br>Deflation|
|---|---|---|---|---|
|HICES|2003-2012|Consumption, income|National, urban/rural|No|
|SILC|2009-2012|Income|NUTS1|No|
|LFS|2009-2013|Imputed Income|NUTS2|Yes|

This paper applies well established econometric techniques of survey to survey imputation (Elbers, Lanjouw, and Lanjouw, 2003) to estimate poverty rates at the NUTS2 level (26 regions in Turkey) by combining information from the SILC with the Turkish Labor Force Survey (LFS). This approach is necessary since, as in most other countries in the world, income collected by the LFS includes only wage income from employment,<sup>8</sup> which is insufficient for measuring of total household income used for welfare measurement. By definition, total household income should include both labor and non-labor components. In the LFS, important sources of non-labor income such as social assistance, pensions, asset liquidation or private transfers are missing. Total household income and household characteristics from the SILC are used to impute total household income into the LFS. Moreover, the fact that Turkey has both the LFS and SILC conducted in parallel allowed the use of different vector of coefficients between 2006-2011.<sup>9</sup> In the case of the 2005, the coefficients from 2006 are used (given that there are concern regarding the quality of the first year of implementation of the SILC 2006, and in 2012 and 2013, the coefficients of the 2011 are used). As a result of the impuation, poverty is measured as total household income poverty in per capita terms. Another advantage of using the LFS is the availabliity of CPI at the NUTS2 level in Turkey which allows for spatial deflation.

> 7 Turkish Statistical Institute (TUIK) has started to collect NUTS2 level data in the 2014 SILC at the NUTS2 level. This data should be made available to the public in 2016.

> 8 Wage income is only available for regular and casual employees in the LFS which accounts for around 60% of total employment. There is no other monetary income value for the rest of the working population.

> 9 It is important to notice that the time dimension used in this paper reffers to the period of reference of the income variable from the survey, and not the official survey year. This is particularly relevant to the case of the SILC, which in the survey year T, reports the income for the period of reference T-1.

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