Rural poverty: Political shock

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Offline Rozina Akter

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Rural poverty: Political shock
« on: February 24, 2015, 01:09:18 PM »
Rural households in Bangladesh move up and down the poverty line owing mostly to different types of shocks. For the first few decades after independence, natural shocks captured news headlines but of late man-made shocks have overtaken natural shocks. For example, instead of floods or drought causing a havoc, hartals, blockades (oborodh), bomb blasts, arson attacks (or repressions by law-enforcement agencies) have emerged as villain number one. Periodic shocks  from any source, can lead to fluctuations in economic well-being of a household.  Look at the frightening pale faces of day-labourer waiting for work the demand for which has reduced due to political unrest. Besides producing immediate hardships, these shocks also generate long-term adverse consequences in terms of, say, erosion in human capital base.  By and large, both the nature of shocks and the coping mechanism go to determine how people succeed or fail to come out of the grip of poverty.

Rural life in Bangladesh embraces a number of conundrums - 'ranging from vagaries of the nature and uncertainties of the market to personal calamities of myriad types'. Customarily, shocks are classified as 'covariate' or 'systematic' shocks and 'idiosyncratic' shocks. The former tends to affect a large number of people sharing common characteristics such as floods, cyclones, and drop in yield or price of a staple crop. By contrast, idiosyncratic shocks are peculiar to a person or a household such as death or prolonged illness of the major income-earner of the family. Impression about the distinction is important to draw policy conclusion, e.g., a standard insurance policy may suit the idiosyncratic shocks but not covariate shocks. Again, the coping strategy adopted by households would be different in two cases.

However, from the point of view of the impacts of shocks on the household economy and the consequent coping strategy, a more useful way is to look at the nature of impact on the household economy namely, asset shocks, income shocks and expenditure shocks. For example, death of a livestock is an asset shock, loss of job is an income shock and treatment of illness is an expenditure shock.

Coping strategies are also multi-dimensional depending on the nature of shocks and the resources available to the households. A paper, a la Osmani and Ahmed (2013), classified these as erosive and non-erosive coping strategies. Erosive strategy involves some immediate erosion of the household's asset base, while non-erosive strategy keeps the asset base intact, at least in the short-run. For example, sale of land or other assets or drawing down accumulated savings in mitigation is erosive strategy. "An erosive strategy with long-term consequences would involve stopping children from going to schools either to save on educational expenses or to use children's labour for the purpose of earning additional income; in either case, it would entail a loss of future human capital". Examples of non-erosive strategy include borrowing, drawing upon reciprocal support system, social safety nets, etc.

The 'vulnerability' context can be also be analysed from another angle. Households eke out a living from five types of capital they are endowed with in varying degrees. These are human capital (H), natural capital (N), financial capital (F), physical capital (P) and social capital (S).

First, less than a quarter of households reported that they have faced shocks during the comparable periods perhaps giving the good news that roughly four-fifths of the  rural households stayed outside the shackles of shocks during 2010-2013. Apparently, the observed ratio of incidence is much lower than that of other studies available.  However, gleaning at disaggregated data set, we find that in households of some villages the proportion is around 33-56 per cent (highly vulnerable) while in other villages, the incidence ranges between 20-28 per cent (moderately vulnerable). Taken together, we can possibly argue that 25-40 per cent of households have faced shocks of a tall order during 2010-2013. Second, most of the high and medium vulnerable households belong to unfavourable agro-ecological zones including Khulna and Barisal. The higher incidence of shocks in Chittagaong and Dhaka could possibly be explained by the fact that the sample villages lie in vulnerable zones.

An investigation into the recipients of shocks would hopefully provide some interesting insights. First, farm households seem to be more prone to shocks than households of other occupations. This is not surprising given the fact that, shocks from natural calamities like floods, drought or hailstorms damage crops for which farm  households face income loss. Lower incidence among agricultural and non-agricultural labour, compared to counterparts business and services, is also not surprising since their mobility is high and occupational shift can be swift to avoid shocks. Second, as one moves up the landownership scale, one finds higher incidence of shocks. In other words, higher land owning groups are more susceptible to shocks than landless ones. The same explanation shows that calamities damage land-based activities or other assets to reduce income of the households. On the other hand, landless households have little asset base to suffer a shock; besides, their occupational mobility from farm to non-farm could help stem the rots. Finally, the rich and the solvent segments of the rural households appear to be more vulnerable than the poorer ones. In other words, the poor are not necessarily more vulnerable than the non-poor ones.

The above-mentioned observations are drawn from household-level data in rural areas administered through structured questionnaire. But the seven-week-long hartals and blockades, accompanied by arson attacks and bomb blasts, seem to hurt the farmers and the poor most. Farmers cannot market commodities, especially perishable ones at reasonable prices; day-labourers get no wage as the demand for their work has dwindled. By and large, the political shock, hitherto unheard of in empirical literature, has played a havoc.

The writer is a Professor of Economics at Jahangirnagar University.
Rozina Akter
Assistant Professor
Department Of Business Administration

Offline Tofazzal.ns

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Re: Rural poverty: Political shock
« Reply #1 on: June 14, 2015, 02:18:49 PM »
Excellent article....
Muhammad Tofazzal Hosain
Lecturer, Natural Sciences
Daffodil International University