Poverty and Inclusion in the West Bank and Gaza. Tara Vishwanath and Roy Van der Weide

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1 Poverty and Inclusion in the West Bank and Gaza Tara Vishwanath and Roy Van der Weide

2 Oslo accord created a fragmented territory, with no Palestinian control over Area C Overlaid by a regime of internal and external closures Limited control over economic policies and trade Dependence on international aid and Israel

30 20 10 0 GDP growth in the West Bank and Gaza (Annual percentage change) -10-20 -30 West Bank Gaza 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 150 130 110 90 Changes in

3 GDP growth in the West Bank and Gaza (Annual percentage change) West Bank Gaza Changes in the Sectoral Shares in GDP (Index; 1994=100) Agriculture Construction Private services Public services Manufacturing

4 60.0 Total West Bank Gaza

5 % 50% 40% 30% 20% 10% 0% 0.00 Gaza West Bank West Bank Unemployment West Bank Youth Unemployment Gaza Unemployment Gaza Youth Unemployment Social Assistance as a share of total household consumption expenditures: West Bank and Gaza, Unemployment: West Bank and Gaza,

6 West Bank and Gaza Jordan Pakistan Nigeria Yemen India Yemen Jordan West Bank and Gaza Turkey Turkey India Pakistan Iraq Iraq Egypt Nigeria Ghana Cameroon Sudan Ghana Sudan Cameroon Egypt Life expectancy at birth (years) Stunting (%) Wasting (%) Literacy rate, adult (% of people ages 15 and above)

7 Widespread perception of despair especially in Gaza: media reports of poverty, distress How does this reconcile with consumption poverty estimates? Or does it reflect multiple deprivations? Do subjective perceptions of poverty reflect this fundamental lack of improvement in economic conditions in Gaza? Anecdotal evidence on the impact of checkpoints on growth and trade, very little systematic microeconomic evidence Unique geo-referenced data set Spatial disparities within the West Bank First stage of evidence in how checkpoints adversely affect prices and unemployment

8 The Geography of Poverty: New Tools with Applications to the West Bank Roy van der Weide (DECPI) The World Bank April 21, 2011, Washington DC

9 Outline Spatial analysis: Empirical questions and tools How we use the tools in the WBG Poverty Assessment: The Spatial Dimensions of Poverty in the West Bank: Geography or Checkpoints? On the agenda Tool development On the agenda New applications New data New countries

10 Putting poverty on the map Are there well-defined pockets of poverty? Where are the lagging and leading areas? Do poverty, low and (lack of) high waged economic activity, unemployment, (poor) access to markets, show a coherent geographical pattern? Do areas with the highest poverty rates also hold the largest number of poor? Is population growth tied to economic growth, and vice versa? How well does the existing road network do in connecting people (and economies)?

11 Internal barriers vs. price differentials How large is the effect of distortions brought on by internal barriers on the economy? What % increase in transaction costs? What % change in unemployment and wages in affected areas?

12 Methodology Spatial kernel regression

13 Spatial smoothing: Estimating routes

14 Poverty and number of poor

15 Sectors of employment

16 Work in Israel and unemployment

17 Access to markets and checkpoints

18 Methodology Spatial price differentials versus internal barriers Regressing absolute spatial price differentials on the nr. of internal barriers between locations Controlling for distance A way of measuring the size of the distortions brought on by internal barriers Spatial price differentials serve as a proxy for transaction costs In the absence of arbitrage, price differences are bounded by transaction costs Keep nearest neighbours as these are more likely to involve in trade

19 Prices and checkpoints Loc-nearest-loc Rice Vegetables Potato & onion Fruits Tea & sugar Distance checkpoint 0.032* ** or more cp ** 0.099** 0.083** Constant ** ** 0.061** Adj. R-squared Obs

20 On the agenda Tools Spatial kernel regression versus the poverty mapping approach put forward by Elbers et al. (2003) Under what conditions do they provide very similar or different estimates? Develop spatial kernel regression into a user friendly tool Implement it in easy to use software

21 On the agenda Applications The West Bank Updating database of closure obstacles: Are mobility restrictions easing over time? Do internal barriers also impact on international trade? Lao PDR Spatial analysis of rice price inflation The Philippines Islands as internal barriers

Spatial Disparities and Development Policy in the Philippines

Spatial Disparities and Development Policy in the Philippines Arsenio M. Balisacan University of the Philipppines Diliman & SEARCA Email: arsenio.balisacan@up.edu.ph World Development Report 2009 (Reshaping