Measuring Poverty in Cuba
Transcript of Measuring Poverty in Cuba
-
7/28/2019 Measuring Poverty in Cuba
1/22
Poverty and inequality:
the policy challenge
Emily Morris
International Institute for the Study of CubaOctober 9th 2008
-
7/28/2019 Measuring Poverty in Cuba
2/22
Poverty and inequality:the policy challenge
Policy objectives
Measuring poverty and inequality in Cuba
Assessing the record in context
Policy debates and challenges
-
7/28/2019 Measuring Poverty in Cuba
3/22
Policy objectives
The basic principle of the Cubanrevolutionary process is development withequity and social justice, involving
the redistribution of incomes in favour ofworkers and marginalised groups
the elimination of unemployment
the raising of living standards.
-
7/28/2019 Measuring Poverty in Cuba
4/22
Measuring poverty and inequality in Cuba
Measurements of poverty and inequality: Absolute poverty minimum level of income
necessary to meet basic needs Extreme not enough food
Moderate not much money
Standard measures: equivalent to US$1 or US$2 a day.
Relative poverty less than half average income?
Inequality Gini coefficient
In Cuba: Big problem: how to measure real incomes?
-
7/28/2019 Measuring Poverty in Cuba
5/22
Measuring poverty and inequality in Cuba:real incomes
Aggregate consumption -- nominal and real
0
50
100
150
200
250
300
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Index,1990=10
0
Nominal household consumption Real household consumption
Economic crisis = lower real average incomes = more poverty,but how much? And for whom?
-
7/28/2019 Measuring Poverty in Cuba
6/22
Measuring poverty and inequality in Cuba:calculating real wage growth: data
-10-5
0
5
10
1520
25
30
35
40
%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Nominal wage growth CPI average increase
Estimates
-
7/28/2019 Measuring Poverty in Cuba
7/22
Measuring poverty and inequality in Cuba:calculating real wage growth: results
0
50
100150
200
250
300
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Index,1990=100
Nominal wages
Cost of living index (1989=100)
Average real wage index (1989=100)
but which measure of consumer price inflation?
-
7/28/2019 Measuring Poverty in Cuba
8/22
Measuring poverty and inequality in Cuba:real wages with rations and fixed prices
1990
0
50
100
150
200
250
300
nominal peso
wage
US$ equivalent
Other
goods
Rent,utilities
Rationedfood
1993
0
50
100
150
200
250
300
nominal peso wage US$ equivalent
-
7/28/2019 Measuring Poverty in Cuba
9/22
Measuring poverty and inequality in Cuba:real wages with rations and fixed prices
1990
0
50
100
150
200
250
300
nominal peso
wage
US$ equivalent
Other
goods
Rent,utilities
Rationedfood
1993
0
50
100
150
200
250
300
350
400
nominal peso wage US$ equivalent
-
7/28/2019 Measuring Poverty in Cuba
10/22
Measuring poverty and inequality in Cuba:the decline in CUP purchasing power
0
0.020.04
0.060.08
0.1
0.120.14
0.160.18
0.2
1990
1992
1994
1996
1998
2000
2002
2004
2006
exchange rate: US$ per CUP
The purchasing power of the extra peso remains small
-
7/28/2019 Measuring Poverty in Cuba
11/22
Measuring poverty and inequality in Cuba:the rise in US$ purchasing power
0
10
20
30
40
50
60
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Value of US$100 as multiple of average monthly wage
and the value of the dollar is still large
-
7/28/2019 Measuring Poverty in Cuba
12/22
Measuring poverty and inequality in Cuba:the currency divide
In 1993 US$2 could match an average months salary of 182
pesos (real value around US$150)
to double it would take another US$150, or over15,000 (150 x 100) pesos, or 82 months
In 2007 US$20 would be needed to match a months salary of
400 pesos (real value around US$300) to double it would take another US$300, or 7,200
pesos (300 x 24), or 18 months
-
7/28/2019 Measuring Poverty in Cuba
13/22
Measuring poverty and inequality:average real incomes disguise divergence
Aggregate nominal and real consumption, and nominal wages
0
50
100
150
200
250
300
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Index,
1990=1
00
Nominal household consumption Real household consumption
The gap between peso and hard currency (US$/CUC) incomes widenedin 1990-1993; narrowed in 2005-2007
Shortages, currencydepreciation,agromarkets
Higher wages, morebonuses, more goods onsale in pesos
-
7/28/2019 Measuring Poverty in Cuba
14/22
Measuring poverty and inequality:findings
Wages: average real disposable peso incomesbarely recovered from 1990-1993 collapse
Poverty: basic needs have been met
Inequalitybetween peso earners was reducedby the crisis and remains small
Most inequality still springs from duality betweenhard currency and peso, formal and informal,
economieswhich is different.
-
7/28/2019 Measuring Poverty in Cuba
15/22
Assessing the record in context:real wages in transition
Slovenia
Poland
Czech Republic
Slovakia
Hungary
Georgia
Estonia
Latvia
Romania
Kyrgyzstan
Bulgaria
Lithuania
Azerbaijan
Kazakhstan
Russia
Moldova
-80 -60 -40 -20 0 20 40
%Change in Real Wages, 1990-98
Source: World Bank, Making Transition Work for Everyone, 2000
Cubas decline in real average wages was not exceptionally severe
-- and other entitlements reduced the impact on welfare
-
7/28/2019 Measuring Poverty in Cuba
16/22
Assessing the record in context:infant mortality
0
2
4
6
8
10
12
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
deathsper1,000
Positive proxy indicators: low and falling mortality rates
-
7/28/2019 Measuring Poverty in Cuba
17/22
Assessing the record in context:infant mortality in transition
0
5
10
15
20
25
30
ROMANIA
RUSSIAN
FEDERATION
UKRAINE
BULGARIA
POLAND
HUNGARY
SLOVAKIA
CZECH
REPUBLIC
CUBA
1990
1993
1998
2005
comparing well with the transition economies
-
7/28/2019 Measuring Poverty in Cuba
18/22
Assessing the record in context:inequality in transition
Income Inequality in Selected ECA Countries During
Transition
0
0.1
0.2
0.3
0.40.5
0.6
0.7
CzechRep
ublic
Hungary
Slovenia
Belarus
Lativa
Ukraine
Po
land
Lithu
ania
Croatia
Estonia
Moldova
Georgia
Russian
Federation
KrygyzRepublic
Tajiksitan
Armenia
Ginicoefficient(percent)
1987-90
1996-99
Cuban income inequality increased but comparisons are difficult
-
7/28/2019 Measuring Poverty in Cuba
19/22
Assessing the record in context:findings
The increase in poverty and inequality inCuba was induced by post-CMEAeconomic crisis
Its record in meeting basic needs andmaintaining equality in the formal sectorhas been positive
But the gap between dollar and pesoeconomies persists
-
7/28/2019 Measuring Poverty in Cuba
20/22
Policy debates
Ideology: welfare priorities Commitment to protect the vulnerable, maintain social
cohesion and preserve human capital
+ Management and resources: targeting
Reforming institutional infrastructure Raising spending Improving accountability
Auditing Decentralisation
Markets: getting the prices right How to square the exchange rate circle ? How to improve incentives but contain inequality,
using entitlements, bonuses and taxes ?
-
7/28/2019 Measuring Poverty in Cuba
21/22
Conclusions
Increase in poverty and inequality since1990
has been mitigated by policy
A heterodox policy approach bringing gradual improvement
but corrosive imbalances remain
no simple solutions
-
7/28/2019 Measuring Poverty in Cuba
22/22
Poverty and inequality:
the policy challenge
Emily Morris
International Institute for the Study of CubaOctober 9th 2008