Poverty and Income Inequality in Asia

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Poverty and income inequality in Asia

• Too big to ignored ?

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Contents
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Percentage population living on less than 2 per
day
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social problems
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Perspective
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Absolute Poverty
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Relative Poverty
Relative
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National Poverty Line
Standards and definitions vary across different
countries
National Poverty Line
poverty line deemed appropriate for a country by
its authorities
Based on population-weighted Subgroup estimates
from household surveys
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International Poverty Line 2 per day
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Asias performance
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Divergence
The data and statistics affirm that gap between
the rich and the poor has grown, rather than
diminished, with sustained growth in income
Some of Asia has shown good progress on poverty
in recent years, like China and South Korea
Asia, holding the largest populations, still has
many extreme poor
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Perspective
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Inequalities
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The extent of concept
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Measurement of Poverty

• 1. Headcount Index
• Its the proportion of poor people in the
  population or the headcount ratio (HCR).
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• Where q refers to the number of individual below
  a given poverty line, and n refers to the total
  number of individuals in country.
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• For example, Thais poverty line 2010 is 1,678
  Thai Baht or approximately
• 54 per month. There are 5.1 million individuals
  live below the poverty line. And our population
  is about 66 million people.
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• Thais HCR 7.72
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• So, headcount here would show us that 7.72 of
  total population is in poverty.

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Measurement of Poverty

• 2. Using the poverty line that called the
  international poverty line
• It can use to compare among many countries by
  some standard. The World Bank uses two lines for
  what can be called poverty (percentage of
  household live in 2 per day) and extreme poverty
  (percentage of household live in 1 per day)
• Nowadays, there is the national poverty line
  that stems from concerning about the difference
  in each country about population, economic
  condition and so on. So, the national poverty
  lines vary in each country.
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Measurement of Inequality

• 1. Using percentage share of income
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• We divide the population into 5 groups
  (Quintiles) or 10 groups (deciles), and consider
  about what percentage share of income that each
  group receives. Ideally, each group has to get
  income or benefit equally, but it does not like
  this due to uneven distribution which leads to
  inequality.
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Ideally
Income Category Percentage share of income
Lowest Quintile 20
Second Quintile 20
Third Quintile 20
Fourth Quintile 20
Highest Quintile 20
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In fact (data from https//www.cia.gov/library/pub
lications/the-world-factbook/fields/2047.html)
Thailand -2009
Income Category Percentage share of income
Lowest deciles 1.6
Second deciles N/A
Third deciles N/A
Fourth deciles N/A
Fifth deciles N/A
Sixth deciles N/A
Seven deciles N/A
Eight deciles N/A
Ninth deciles N/A
Highest deciles 42.6
Highest Quintile is higher than lowest Quintile
about 25 times.
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China - 2008
Income Category Percentage share of income
Lowest deciles 3.5
Second deciles N/A
Third deciles N/A
Fourth deciles N/A
Fifth deciles N/A
Sixth deciles N/A
Seven deciles N/A
Eight deciles N/A
Ninth deciles N/A
Highest deciles 15
Highest Quintile is higher than lowest quintile
about 4.3 times
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Singapore - 2008
Income Category Percentage share of income
Lowest deciles 4.4
Second deciles N/A
Third deciles N/A
Fourth deciles N/A
Fifth deciles N/A
Sixth deciles N/A
Seven deciles N/A
Eight deciles N/A
Ninth deciles N/A
Highest deciles 23.2
Highest Quintile is higher than lowest quintile
about 5.27 times
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Japan 2008
Income Category Percentage share of income
Lowest deciles 1.9
Second deciles N/A
Third deciles N/A
Fourth deciles N/A
Fifth deciles N/A
Sixth deciles N/A
Seven deciles N/A
Eight deciles N/A
Ninth deciles N/A
Highest deciles 27.5
Highest Quintile is higher than lowest quintile
about 14.5 times
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Measurement of inequalities

• 2. Lorenz Curve and Gini Coefficient
• Lorenz curve gives information on the
  distribution of income. Its a rough index of
  income inequality.

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Lorenz Curve

• The horizontal axis gives the percentage of
  households. The vertical axis gives the
  percentage of nations income. The green line or
  45-degree line is called line of equal
  distribution or egalitarian line.
• Note that no nation has a Lorenz curve such as
  green line. The degree of inequality typically
  prevails.
• From the information in Lorenz Curve, we can get
  the Gini index, which measure the degree of
  inequality for any income distribution by
  calculating the ratio of area between the Lorenz
  curve and 45-degree line.

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Gini Coefficient
If the Gini coefficient were equal to zero, the
Lorenz curve would be the 45-degree line. The
closer to zero, the more equal about income
distribution.
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Gini Coefficient and Tax

• Gini Coefficients are often calculated for pretax
  and posttax income distribution. If the Gini
  coefficient is lower for the posttax, it means
  that taxes have served the function of reducing
  income inequality.
• For example, on average in 2000s, 
• Japans Gini coefficient pretax is 0.462
• Japans Gini coefficient posttax is 0.329
• It means that imposition achieve the target of
  reducing inequalities

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China
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SUMMARY
China 2010 ranks the world's 2nd largest
economy. It is the world's fastest-growing major
economy with consistent growth rates of around 9
over the past 30 years since 1980. At that time,
economic reforms initiated after 1978 began to
generate significant and steady growth in
investment, consumption and standards of
living. China is also the largest exporter and
second largest importer of goods in the world.
The country's per capita GDP was 7,544 in
2010. Especially, the provinces in the coastal
regions of China tend to be more industrialized
while regions in the hinterland are less
developed.
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Two sector agriculture and industry

• The two most important sectors of the economy are
  agriculture and industry. The two sectors differs
  in many terms including technology, labor
  productivity, and incomes that have advanced
  rapidly in industry than in agriculture.
• Agricultural output follows the effects of
  weather, while industry is directly influenced by
  the government. The disparities between the two
  sectors have combined to form an
  economic-cultural-social gap between the rural
  and urban areas.

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Coastal and Inland Problems

• Economic development is more rapid in coastal
  than in the inland area, and there are large
  disparities in per capita income between these
  regions. The three wealthiest regions are in the
  southeast coast, centred on the Pearl River
  Delta along the east coast, centred on the Lower
  Yangtze River and near the Bohai Gulf, in the
  BeijingTianjinLiaoning region.
• It is the rapid development of
  these areas that is expected to contribute to the
  Asian regional economy growth, and Chinese
  government policy is designed to remove the
  obstacles to accelerated growth in these
  wealthier regions.

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5 Policies to reduce inequalities

• China Western Development for increasing economic
  situation of the western provinces through
  capital investment and development of natural
  resources.
• Revitalize Northeast China, to renew the
  industrial bases in Northeast China covered the
  three provinces of Heilongjiang, Jilin, and
  Liaoning
• Rise of Central China Plan to boost the
  development of its central regions. It covers six
  provinces Shanxi, Henan, Anhui, Hubei, Hunan,
  and Jiangxi.
• Third Front, focused on the southwestern
  provinces.
• Go Global, to encourage its enterprises to invest
  overseas.

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Partial Development in China
Inland and Coastal Region
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Partial Development in China
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Regional Differences
Inland regions have less favorable natural
conditions for agricultural production.
Geography plays a role in producing
Long distance of inland regions limits the
access to seaports and international market.
Geography also affects regional development
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Government Policies
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Conclusion
Globalization Fiscal decentralization Marketization
Target - Enhance trading - make a connection to others Weaken the financial capacities of the central government impair its abilities to redistribute resources among region for an equity Make an ownership transformation market flexibility effectively absorbed surplus rural labor into industrial production
Coastal Benefit Considerable autonomy enjoy Tax treatment preferential allocation of resource It took place only coastal area - Especially the new rich provinces Lead to many non state enterprise rapid economic growth
Inland effect Inlands FDI is less than Coastals FDI, so it is attractive investor to invest in coastal more than inland area lack of opportunities to grow due to small magnitude of investment. Insufficient revenue heavier fiscal burden a worse investment environment Inland ownership transformation has been carried out more slowly inland regions have been lacking behind in developing key market institution
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Comparison between Philippines and Taiwan
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Gini Coefficient
Year Philippines Taiwan
1985 0.410 0.290
1988 0.406 0.303
1991 0.438 0.308
1994 0.429 0.318
1997 0.462 0.320
2000 0.461 0.326
2003 0.445 NA
2006 0.440 NA
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Share of Total Income of the Poorest Quintile and
the Richest Quintile
Year Philippines Philippines
Year Poorest 20 Richest 20
1988 5.2 51.8
1991 4.7 53.9
1994 4.9 52.0
1997 4.4 55.5
2000 4.4 54.8
2003 4.7 53.4
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GDP per capita (PPP) (USD)
Year Philippines Taiwan
2000 3,800 17,400
2001 4,000 17,200
2002 4,200 18,000
2003 4,600 23,400
2004 5,000 25,300
2005 4,700 27,500
2006 5,000 29,500
2007 3,200 30,100
2008 3,300 31,100
2009 3,300 32,000
2010 3,500 35,700
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GDP per capita (PPP) (USD)
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Population below poverty line ()
Year Philippines Taiwan
1997 36.8 N/A
1999 N/A 1
2000 33.0 1
2001 38.0 N/A
2003 24.9 N/A
2005 N/A 0.9
2006 26.4 0.9
2007 N/A 0.95
2008 N/A 1.08
2009 26.5 N/A
2010 N/A 1.16
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Causes of income inequality in Philippines
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Causes of poverty in Philippines
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Conditions for development in Taiwan
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Global distribution of income
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Global distribution of income
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Other ways to reduce poverty and inequality

• Open Economy in overall sectors
• Land reform
• Inherence tax
• Welfare state
• Green Revolution
• Technological process
• International consensus

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Thank You !