Measuring Poverty in Armenia

1. NATIONAL STATISTICAL SERVICE OF THE REPUBLIC OF ARMENIA Measuring Poverty in Armenia GagikGevorgyan Member of State Council on Statistics of the Republic of Armenia LilitPetrosyan Member of State Council on Statistics of the Republic of Armenia Geneva, 2-4 December, 2013

2. Integrated Living Conditions Survey (ILCS) • First conducted in Armenia in 1996 (in a one-month period). • It has been conducted every year since 2001 • The survey is carried out during the year with monthly changes (rotation) of households and communities. • Starting from January 1, 2007 to January 20, 2012 the ILCS has been co-funded by the RA State Budget and the US Government’s Millennium Challenge Corporation (MCC) funded Millennium Challenge Account-Armenia Program (MCA-Armenia). • The sample size of the ILCS has been expanded from 5184 in 2006 to 7,872 households annually.

3. Consumption aggregate • Poverty is evaluated by means of material (monetary) indicators. In that context, according to the World Bank definition, “poverty is the inability to ensure an acceptable minimum of certain living standards.” • In order to asses the level of well-being in Armenia consumption aggregate is used. • Consumption aggregate includes the following components: • (a) cost of consumed food and non-food goods, including own production, aid from charitable organizations and other sources, and • (b) estimated cost of durable goods.

4. (i) Food consumption: • Food consumption includes food consumed at home and outside the home and in-kind food consumption such as own food home production, food gifts and transfers in-kind, and humanitarian food aid.

5. (ii) Non-food consumption • Non-food consumption comprises the following categories: • alcoholic beverages and tobacco, • clothing and footwear, • household goods, • transportation, • utilities, • recreation, • education, • health. • in-kind non-food consumption, such as • non-food goods and • services received free of • the estimates of the rental value of durables.

6. Poverty Profile In Armenia • In order to assess poverty level in Armenia, concept of absolute poverty was used. According to living standards, population of Armenia is divided into poor and non-poor. Poor include two groups: very poor and extremely poor. • The poor are defined as those with consumption per adult equivalent below the upper general poverty line; • The very poor are defined as those with consumption per adult equivalent below the lower general poverty line, • The extremely poor or the undernourished are defined as those with consumption per adult equivalent below the food poverty line.

7. Poverty lines • The poverty line is defined as the monetary value of the minimum consumer basket, which represents the amount of goods and services that meet the needs of the minimum level of living standards formed (actually expressed) in society. • This is the factually formed minimum consumption standard the value of which varies according to changes in consumer prices.

8. Poverty lines (cont.) • The Minimum Consumer Basket consists of 2 components: • a Minimum Food Basket, corresponding to the allowance for basic foods, and • an allowance for basic non-food goods and services. • Therefore, a poverty line consists of 2 components: • Food poverty line (estimated monetary value of Minimum food basket). • Estimated Cost of non food goods and services.

9. Estimation of the Food Poverty Line • To estimate the food poverty line, NSS uses the World Bank’s methodology based on the “Cost of basic needs” approach. • The average caloric requirement for Armenia was calculated by NSS with the technical assistance of the World Bank in 2004 using information on caloric requirements of different demographic groups according to the World Health Organization (1985) standards and information on population shares of these demographic groups. • In that way, the average caloric requirement for Armenia was estimated at 2,232 calories per day per capita.

10. The Cost of Minimum Food Basket • Based on the consumption shares of the selected reference population, 2,232 calories per day is then allocated across the “most important” food items. • This minimum calorie diet is then has been priced by 2009 average annual national prices using the price-per-calorie (Pf/cf) for each food item. • So, the monetary value of the minimum food basket is the Food Poverty Line.

11. The Food Items and nonalcoholic beverages in the Minimum Food Basket • The Armenia ILCS collects information about the prices of 208 most important food items and non alcoholic beverages.

12. The composition of food poverty line, in %

13. Lower poverty line • The Consumption Basket Method, which calculates the food share in total consumption of those households whose total consumption, is around to the food poverty line, estimates the food share closer to 70 percent. • Adding the respective non food allowance we come up with Lower Poverty line.

14. The composition of lower poverty line, %

15. Upper Poverty Line • Meanwhile the Food Expenditures Method, which calculates the food share in total consumption of those households, whose food consumption value is around the food poverty line, estimates the food share closer to 56.5 percent.

16. The composition of upper poverty line, %

17. Poverty Lines in 2011, Per Adult Equivalent, Per Month

18. Poverty Incidence, 2008 and 2011, %

19. Poverty gap and severity, in 2008 and 2011, %

20. Poverty Incidence by Gender Groups, 2008 and 2011, in percent

21. Poverty Incidence by Household Size, 2008 and 2011, in percent

22. Poverty Incidence by Educational Level, 2008 and 2011, in percent

23. Poverty Incidence of Population (15-75 Years of Age) by the Number of Household’s Employed Members, 2008 and 2011, in percent

24. Integrated Living Conditions Survey (ILCS) • The poverty assessment methodology updated in 2009 and implemented with the assistance of the World Bank experts the new minimum food basket has been introduced, which reflects changes in the consumption structure since 2004-2008, as well as the current shares of food and non-food products and services. • The ILCS 2009 data have been used for designing the new consumption model. The newly defined minimum food basket has been used for estimating the extreme (food) and total (lower and upper) poverty lines (as a transition from two to three-tier assessment of poverty).

25. Thank you