InterGenerational Transfer of Household Poverty in Kwa Zulu

Inter-Generational Transfer of Household Poverty in Kwa. Zulu Natal: Evidence from KIDS (1993 – 2004) Antonie Pool University of the Free State TIPS Conference, Cape Town October 2008

Outline of paper p Literature review p Data p Methods p Results p Conclusion and policy recommendations

Background & Literature Poverty alleviation is focus of many policy frameworks (MDG’s, ASGISA) MDG’s ½ poverty by 2015 ASGISA ½ poverty by 2014 56% of Africans & 15% of Indians still live in poverty (UNDP, 2004) Poverty = when a person/household cannot attain a reasonable minimum level of economic wellbeing (Ravallion, 1994). Require knowledge of poverty determinants to achieve goal of halving poverty by 2014 Problem is the existence of poverty traps 60% of SA’s poor households are caught in a structural poverty trap (Carter & May, 2001) Inter-generational-transfer of poverty also a poverty trap

Aims of the study p What determines the poverty status of a Dynasty household? p What influence does the background (transitions) of a household have on the probability to be poor? (IGT poverty) p What can be done to ensure the goal of halving poverty by 2014 is reached – given the regression results?

Data p Kwa-Zulu Natal Income Dynamics Study (KIDS) data Longitudinal survey following a random sample of individuals who lived in KZN in 1993. p Survey done in 3 waves n 1993 , 1998, 2004 n In 1998 & 2004, only re-interviewed Africans & Indians p 2004 Due to aging & effect of HIV/AIDS n Include Next Generation & Foster households p Study focuses on all these wave To look at the determinants of poverty in Dynasty households and the role of Core characteristics.

Method p Divided 2004 data between “core” & “dynasty” households n Where dynasty households represent the split-off “next generation” & ”foster” households of the core households

Method - continue p Income Poverty All those households that fall below the pre -defined poverty line n Poverty line = R 250 p/person per month (2000 prices) (Van der Berg & Louw, 2004) n Used CPI to inflate poverty line to 1993, 1998 & 2004 value n Used adult equivalent household sizes n Compared household poverty line based on household expenditure

Method - continue p Regression analyses Firstly used Panel data to determine dynamic variables, followed by a cross sectional Probit model estimation n Indicate the effect of each independent variable on the probability that a Dynasty household is poor (HHSize = 0. 05 For every 1 additional member in the hh, the probability to be poor increases by 5%) n This identify the distinction of core dynamics versus dynasty characteristics as the main determinants of poverty

Household level of poverty Difference between 2004 dynasty- & 1993 core households significant at 10% level of significance. Differences between 2004 dynasty- & both the 1998 & 2004 core households significant at 1% level of significance.

Levels of education (1993 Core & 2004 Dynasty)

Poverty status of core households (1993 -2004)

Regression Analyses - The model

Regression Results – Dynasty Characteristics * 10% level of significance; **5% level of significance; *** 1% level of significance

Regression Results – Core Characteristics * 10% level of significance; **5% level of significance; *** 1% level of significance

Regression Results – Pooled models * 10% level of significance; **5% level of significance; *** 1% level of significance

Regression Results – Intergenerational Transfer of Poverty (ITP) (Poverty | X) (d. F/dx) hhsize_Dynasty 0. 0302 ** Dependants_Dynasty 0. 0350 * Transitory. Poor 0. 1487 *** Chronically. Poor 0. 4131 *** Obs 446 Wald chi 2 53. 29 (0. 0000) Pseudo R 2 0. 2056 Correctly classified 80. 04% Std. errors adjusted for clusters 276 * 10% level of significance; **5% level of significance; *** 1% level of significance

Regression Results – Intergenerational Transfer of Poverty (ITP) (Poverty | X) (d. F/dx) No. School_Dynasty 0. 0771 *** Primary_Dynasty 0. 0430 *** Secondary_Dynasty 0. 0074 Matric_Dynasty 0. 0149 Post. Secondary_Dynas ty 0. 1436 ** Transitory. Poor 0. 1134 ** Chronically. Poor 0. 3239 *** Obs 446 Wald chi 2 75. 73 (0. 0000) Pseudo R 2 0. 2537 Correctly classified 81. 17% Std. errors adjusted for clusters 276 * 10% level of significance; **5% level of significance; *** 1% level of significance

Conclusion & Policy recommendations p Household size and the number of dependants in a household have an influence on the probability that a household will be poor. p Surprisingly, employment income has only a small impact on the probability that a household will be poor (Remittance income influence larger) (Maybe due to educational and unemployment profile of group) p Background & change over time (especially in the level of education) play a determinant role in the poverty status of a household p Most important determinant of household poverty is intergenerationally transferred – poverty trap that needs ultimate attention p Those households exposed to IGT poverty – Long-term problem. In these cases, the most important focus must be on education.

Further research: p Interact core/dynasty characteristics to explain why dynasty/core households escaped poverty or not? p The role of migration and net-remittances in poverty.

Thank You