Investing in People to Fight Poverty in Haiti: Reflections for Evidence-based Policy Making

Public Disclosure Authorized Investing in people to fight poverty in Haiti Public Disclosure Authorized Reflections for evidence-based policy making Public Disclosure Authorized Public Disclosure Authorized Investing in people to fight poverty in Haiti Reflections for evidence-based policy making © 2014 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 17 16 15 14 This work is a product of the staff of The World Bank with contributions from staff of Observatoire National de la Pauvreté et de l’Exclusion Sociale (ONPES) of the Government of Haiti. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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Concept & Design: Manthra Comunicación Integral / Santiago Calero Cover Design: Manthra Comunicación integral Contents Forewords xii Acknowledgments xiv Abbreviations xvi Overview 1 Introduction 1 Haiti in 2012: Monetary and multidimensional poverty 2 Improvements in monetary and multidimensional poverty 5 Poverty reduction: the importance of transfers and nonagricultural income 9 Conclusions and Priority Areas for Development and Poverty Reduction Policy Action 12 Background and introduction 14 Part I:Poverty and Inequality Diagnostic, 2012 23 Chapter 1: Poverty profile and trends 24 Introduction 24 Poverty and extreme poverty: levels and trends since 2001 25 Poverty profiles 33 Key messages 43 Part II: Drivers and Constraints for Poverty Reduction 45 Chapter 2: Income generation in rural and urban areas 46 Introduction 46 Income generation in rural areas: opportunities and challenges 49 Income generation in urban areas: opportunities and challenges 63 Internal transfers and remittances: a common strategy for income generation 71 Key messages 76 Chapter 3: Challenges to human capital accumulation 79 Introduction 79 Access to education 82 Access to health care 95 Key messages 114 Chapter 4: Shocks and vulnerability 120 Introduction 120 Shocks, impacts, and household coping mechanisms 123 Vulnerability to natural disasters 134 Key messages 141 iii Chapter 5: Poverty and social protection 145 Introduction 145 Policy framework 146 Social protection needs throughout the life cycle 147 Alignment of social protection, poverty, and risk analysis 150 Key messages 169 Part III: Reflections to Promote Evidence-based Policy Making 173 Chapter 6: The way forward: key messages and priority areas of policy actions 174 Urban and rural livelihoods 175 The access to and quality of health and education services 177 Risk management and protection 178 References 212 Appendixes Appendix A. Poverty indicators, disaggregated by department and area of residence, 2012 180 Appendix B. Income Inequality – Lorenz Curves 181 Appendix C. Poverty rate comparisons 182 Appendix D. The methodology for determining the MPI and identifying the categories of the poor, 2012 183 Appendix E. The evolution of the characteristics of households (poor and nonpoor) 185 Appendix F. Poverty correlates 186 Appendix G. Correlates of poverty and food security 190 Appendix H. Definition of concepts 192 Appendix I. Correlates of labor income, unemployment, underemployment, and informality in urban areas 194 Appendix J. Mincer earnings function and Oaxaca-Blinder decomposition: a methodological clarification 195 Appendix K. Correlates of enrollment and progress in school 199 Appendix L. Descriptive statistics on the shocks reported by households 201 Appendix M. Coping mechanisms 203 Appendix N. Results of the multivariate analysis of shocks 206 Appendix O. Incidence maps of weather events 209 iv Boxes Box O.1. A new national poverty line for Haiti 3 Box BI.1. The history of poverty measurement in Haiti 19 Box 1.1. The use of the multidimensional poverty index to identify the chronic poor 31 Box 1.2. Gender inequalities generate great vulnerabilities in Haiti 38 Box 2.1. The correlates of poverty and food security 52 Box 2.2. Estimating correlates of agricultural productivity 57 Box 2.3. The government strategy for rural development 62 Box 2.4. Zooming in on the gender earnings gap using the Oaxaca-Blinder decomposition 66 Box 2.5. Remittances as a return on investment 75 Box 3.1. The intergenerational persistence of education: educational gap analysis 83 Box 3.2. The education system in Haiti 87 Box 3.3. Cholera epidemiological evolution and current policy actions 102 Box 3.4. The health care system in Haiti 106 Box 4.1. Formal and informal mechanisms for risk management: financial inclusion 130 Box 4.2. The disaster risk management strategy in Haiti 138 Box 5.1. Methodology and limitations of ECVMAS data on social protection 154 Box 5.2. Limited access to a national identification document (CIN) can be an obstacle in gaining access to social protection and other services 156 Box 5.3. Kore Fanmi 166 Maps Map 1.1. Moderate and extreme poverty rates, by department, 2012 27 Map 3.1. Literacy rate in Haiti, 2012 86 Map 4.1. The shaking intensity of the 2010 earthquake 139 Map O.1. Flood-prone areas, Haiti 209 Map O.2. Hurricanes, depressions, and tropical storms, by department, 1954–2001 209 Map O.3. Drought-prone areas, Haiti 210 Map O.4. Earthquakes, by magnitude, intensity, and economic damage, Haiti, 1701–2014 210 Map N.5. Soil Liquefaction incidents, February 2010 211 Map O.6. Landslide incidents during and after the earthquake of January 12, 2010 211 v Figures Figure O.1. GDP per capita in Haiti and in Latin America 2 Figure O.2. Incidence of poverty and number of poor in urban and rural areas 3 Figure O.3. Distribution of household per capita consumption (in Gourdes) 5 Figure O.4. Evolution of extreme poverty in Haiti, 2000-2012 6 Figure O.5. Income inequality in Haiti and in Latin America, circa 2012 7 Figure O.6. Changes in per capita income composition in urban areas per income quintile, 2001–12 10 Figure O.8. Changes in per capita income composition in rural areas per income quintile, 2001–12 11 Figure BI.1. GDP per capita in Haiti and in Latin America 14 Figure BI.2. GDP growth rate in Haiti and Latin America in 1980–2013 15 Figure BI.3. Real and per capita GDP growth in 2001–2013 18 Figure 1.1. Incidence of moderate and extreme poverty in urban and rural areas, 2012. 26 Figure 1.2. Trends in extreme poverty in urban and rural areas, 2000-2012 28 Figure 1.3. Income inequality in Haiti and in Latin America 30 Figure B1.1.1. Poverty decomposition according to the MPI and monetary poverty 32 Figure 1.4. Chronic and transitory poverty, service access deprivation and resilience in Haiti, 2012 32 Figure 1.5. Income composition in urban and rural areas and by poverty status 35 Figure 1.6. Food insecurity in Haiti, 2012. 36 Figure 1.7. Share of the population affected by a climatic shock and poverty level, by department 37 Figure 1.8. Poverty rate by region, economic situation and household head’s sector of activity. 42 Figure 2.1. Change in per capita income in urban areas, by income quintile, 2001-2012 47 Figure 2.2. Change in per capita income in rural areas, by income quintile, 2001-2012 48 Figure 2.3. Farm and nonfarm labor force participation, rural households 50 Figure 2.4. Labor force participation, by type of employment 50 Figure 2.5. Employment, by farm and nonfarm participation 51 Figure 2.6. Economic activity, by poverty level 51 vi Figure 2.7. Share of households, by farm activity 54 Figure 2.8. Farm crops grown 55 Figure 2.9. Percentage of households, by livestock raised 56 Figure B2.4.1. Oaxaca-Blinder decomposition results for different specifications, urban Haiti 67 Figure 2.10. The distribution of hourly labor income in urban areas, by industry 68 Figure 2.11. Composition of occupations in urban areas, by industry 69 Figure 2.12. Education among the self-employed earning less or more than the average hourly labor income, urban areas 71 Figure 3.1. Welfare and educational level in Haiti, 2012 81 Figure B3.1.1. Educational gap among children 10-14 by per capita consumption quintile 83 Figure B3.1.2. Average reduction in education gap given a standard-deviation increase in parent educational level, by per capita consumption quintile 84 Figure 3.2. Educational level of adults and young adults 84 Figure 3.3. School enrollment for children in Haiti, 2012 87 Figure B3.2.1. The formal education system 87 Figure 3.4. Enrollment rates in primary, secondary, and tertiary education 88 Figure 3.5. School enrollment by area of residence, poverty status, and gender, % 90 Figure 3.6. Number of public and non-public schools, by year 92 Figure 3.7. Educational expenditures by category, children aged 6 to 14 years 93 Figure 3.8. Financing sources for education 94 Figure 3.9. Infant and under-5 mortality rates, by wealth quintile index. 96 Figure 3.10. The maternal mortality ratio, 1990–2013 98 Figure 3.11. Health care service use, Haiti and selected lower-middle-income Latin American countries. 99 Figure 3.12. Share of households encountering problems over the previous 12 months, 2012 101 Figure 3.13. The five most severe shocks among Haitian households, 2012. 101 Figure 3.14. Causes of non-access to health services, by per capita consumption quintile, 2013 104 Figure 3.15. Obstacles in access to health care services, by wealth quintile index 104 Figure 3.16. Coverage of health services 106 Figure B3.4.1. The health service delivery pyramid 107 vii Figure 3.17. . The density of medical staff: ratio medical staff/poor population 109 Figure 3.18. Incidence of catastrophic health expenditure in Haiti, 2012 112 Figure 3.19. The incidence of catastrophic health expenditures in Africa and Latin America 113 Figure 4.1. Vulnerability to poverty in Haiti, 2012 122 Figure 4.2. Population shares affected by shocks, by department 124 Figure 4.3. Number of shocks by welfare levels 125 Figure B4.1.1. Reasons for not having an account at a financial institution 130 Figure 4.4. Coping strategies, by type of shock 133 Figure 4.5. Climatic shocks and poverty, by department, 2009 134 Figure 4.6. Poverty and vulnerability in Haiti. 135 Figure 4.7. Number of disaster events, by type, Dominican Republic and Haiti, 1980–2010 136 Figure 4.8. Damage among communes as a result of the 2010 earthquake. 139 Figure 4.9. Perceptions of living standards after the earthquake 140 Figure 5.1 Key risks, the life cycle, and social protection in Haiti: a summary 148 Figure 5.2. Access to social security by quintile of per capita consumption 151 Figure 5.3. Coverage of social assistance programs and distribution of beneficiaries. 153 Figure 5.4. Coverage of social assistance programs, by age-group 155 Figure B5.2.1. Availability of national ID among adults 18 years and older 156 Figure 5.5. Incidence of social protection benefits, by quintile of per capita consumption and poverty status 158 Figure 5.6. Benefit amounts and the contribution to the consumption of beneficiaries 159 Figure 5.7. The cost-benefit ratios of various social protection transfers 160 Figure 5.8. Poverty-related spending as a share of GDP 162 Figure 5.9. Main programs under EDE PEP 163 Figure 5.10. Social safety net spending as a share of GDP, low-income countries 164 Figure 5.11. Coverage of EDE PEP programs, by type and by poverty rate and departmen, 2012-13 167 Figure B.1. Lorenz Curves at National, Urban and Rural levels, 2012 181 Figure J.1. Blinder-Oaxaca decomposition for different specifications, urban areas, Haiti 198 viii Tables Table O.1. Access to basic services. 6 Table 1.1. Poverty and extreme poverty in Haiti, 2012 25 Table 1.2. Access to basic services. 29 Table 1.3. Basic sociodemographic and socioeconomic characteristics of poor, extreme poor, and nonpoor households. 33 Table 1.4. Poverty incidence, by category of household 40 Table 2.1. Land acquisition. 53 Table 2.2. Agricultural inputs. 54 Table 2.3. Activities of agricultural households 55 Table 2.4. Diversity among the crops grown 56 Table 2.5. Livestock inputs. 56 Table 2.6. Correlates of agricultural productivity 58 Table 2.7. Nonfarm activity, by type of household. 61 Table 2.8. Household participation in non farm activities, by industry. 61 Table 2.9. Household enterprise profile 62 Table 2.10. Labor market indicators geographically disaggregated. 63 Table 2.11. Labor market indicators in urban settings, by poverty level. 65 Table 2.12. Gender, poverty and labor income in urban areas, by industry 69 Table 2.14. Remittances and other income percent unless otherwise indicated 74 Table 2.15. Uses of transfers in rural areas 74 Table 2.16. Uses of transfers in urban areas 74 Table 3.1. Basic health indicators 82 Table 3.2. The average students completes primary school at nearly 16 years of age 89 Table 3.3. Health outcomes among children, by wealth quintile index, 2005–06 and 2012 97 Table 3.4. Maternal and child health service utilization, by wealth quintile index, 2005–06 and 2012 98 Table 3.5. Children’s health outcomes and service utilization, by educational attainment of the mothers 100 ix Table 3.6. Proportion of households that consider sickness and cholera the most severe problems, by poverty line, residence, and gender. 103 Table 3.7. Health care providers, by the location and poverty level of the population served. 110 Table 3.8. Per capita annual out-of-pocket health expenditures, by poverty line. 110 Table 3.9. Per capita out-of-pocket health expenditures, by gender and location 111 Table 3.10. Household out-of-pocket health expenditures, by service type. (N = 4,929) 111 Table 4.1. The prevalence of types of shocks faced by households, by poverty status 127 Table 4.2. The prevalence of types of shocks, by household type 128 Table 4.3. The economic impact of shocks, by household poverty status. 129 Table 4.4. Disasters in the Dominican Republic and Haiti compared, 1980–2010 136 Table 4.5. Triggers and consequences of hazards in Haiti 138 Table B5.1.1. Sample and population sizes for social protection variables in ECVMAS 2012 154 Table 5.1. Alignment of EDE PEP programs with risks and vulnerabilities across the life cycle 168 Table A.1. Poverty indicator, disaggregated by department and area of residence, 2012 180 Table C.1. Poverty rates based on different poverty lines and welfare measures, 2000–12 182 Table E.1. Characteristics of poor households, 2001 and 2012 185 Table F.1. Linear regressions to identify poverty correlates, by area of residence 186 Table G.1. Correlates of poverty and food security 190 Table I.1. Correlates of labor income, unemployment, underemployment, and informality in urban areas, Haiti 194 Table J.1. Mincer equation results, urban areas, Haiti 196 Table J.2. Average hourly labor income, urban areas, Haiti 197 Table J.3. Gender earnings differentials, Oaxaca- Blinder decomposition, urban areas, Haiti 197 Table K.1. Correlates of enrollment and progress in school 199 Table L.1. Idiosyncratic economic shocks affecting households 201 Table L.2. Prevalence of types of shocks faced by households, by location 202 x Table L.3. Impact of three main types of shocks, by household poverty status 202 Table M.1. Shocks: main coping mechanisms 203 Table M.2. Coping mechanisms to address the most important shocks, by type of shock 204 Table M.3. Coping mechanisms for the most important shocks, households in extreme poverty 204 Table M.4. Coping mechanisms for the most important shocks, resilient households 205 Table N.1. Correlations of the main shocks experienced by households 206 xi Investing in People to Fight Poverty in Haiti Foreword The following is a new study on how poverty and vulnerability manifest themselves in Haiti. Some may question the value and relevance of such an undertaking and wonder if it was really necessary to engage in a new study of these phenomena, already so scrutinized and publicized in Haiti and around the world. What is actually new about poverty and vulnerability to justify this study? What have we truly lear ned about poverty and vulnerability that can help us reduce their adverse effects and promote Haiti’s development? There are a multitude of reports, academic pa pers and documentaries on the reality of poverty in the country, covering nearly every aspect in detail. In recent years, the fight against poverty has been an important part of government action. Thus, starting in 2004, the government developed the interim framework for poverty reduction, which became the National Strategy Document for Growth and Poverty Reduction (DSNCRP) in 2007, and the Action Plan for National Recovery and Development of Haiti (PARDH) in 2010 after the earthquake, and finally the Strate gic Plan of Development of Haiti (PSDH) in 2012, accompanied by the first Triennial Investment Program (PTI) 2014-2016. In each case, the government has sought to link economic growth with the struggle for poverty reduction. Contrary to what has been produced in the past, this report provides an updated picture of poverty, taking into account the living conditions of the people after the 2010 earthquake. It also includes the new national poverty lines derived from the post-earthquake living conditions survey, Enquête sur les Conditions de Vie des Mé nages Après le Séisme (ECVMAS), from which an analysis of the causes and effects of the endemic poverty in the country were produced. This report does not simply address poverty and vulnerability in and of themselves. On the contrary, it helps better identify challenges and opportunities, while also proposing ways to improve the current situation. Michel Présumé Secretary of State for Planning Ministry of Planning and External Cooperation of the Republic of Haiti xii Foreword WorldBank - ONPES Despite numerous challenges, Haiti has made marked progress over the last de cade. The percentage of its people living in extreme poverty has fallen from 31 to 24 percent between 2000 and 2012. Living conditions have broadly improved. There is better access to education, health, and housing services than a decade ago. All of this is welcome news. When we started this report, we knew that the people of Haiti faced multifaceted difficulties across sectors. What we did not know was their magnitude, their geo graphic distribution, or their effects on different groups of the population. Thanks to the joint efforts of the government of Haiti and its partners, including the World Bank, to collect the Enquête Sur les Conditions de Vie des Ménages Après le Séis me (ECVMAS), develop the new national official poverty line, and produce this study, we now have a much clearer picture of the obstacles facing the country, and a precise diagnostic on which we can base policy priorities going forward. We now know that poverty is particularly high and persistent in rural areas, with nearly 75 percent of the rural population remaining poor. We also know that the fight against income inequality has not advanced, and this high inequality has actually increased in rural areas. This study is able to document constraints and opportunities to set the country on a sustainable path of poverty and inequality reduction. Alongside sustained economic growth, and strengthening of governan ce and institutions, we have identified three priority areas for action. First, invest in people by improving access to education, health and basic services. Second, boost income generation prospects, especially in agriculture and among the ur ban self-employed. Third, in the face of high vulnerability to shocks and natural disasters in particular, shield the less well-off from losing their gains through bet ter social protection and risk management. While there is no silver bullet or perfect recipe to guarantee an end to poverty in Haiti, this study can serve as an indispensable tool for policy discussions based on solid evidence, and for program design guided by robust information. We hope it can be used as a building block to construct a better future for Haiti. Mary Barton-Dock World Bank Special Envoy for Haiti xiii Investing in People to Fight Poverty in Haiti Acknowledgments This report is the result of a joint effort by the World Bank and the National Observatory for Poverty and Social Exclusion (ONPES) of the Ministry of Planning and External Cooperation (MPCE). The team at the World Bank was led by Federica Marzo (Economist) and Facundo Cuevas (Senior Economist) and comprised Natalia Garbiras Diaz and Thiago Scot, under the overall supervision of Louise Cord (Practice Manager), Mary Barton-Dock (Haiti Country Director), and Raju Jan Singh (Haiti Program Leader,). The cross-sectorial Poverty Assessment team that authored the background papers included Aude-Sophie Rodella; Bernard Atuesta Montes; Alan Fuchs and Prospère Backiny-Yetna; Gbemisola Oseni; Tanya Savrimootoo, Eli Weiss, and Barbara Coello; Javier Sanchez Reaza and Michel Matera; Carine Clert (Focal point for the so cial sectors); Lucy Bassett, Victoria Strokova, Anna Ocampo and Frieda Vandeninden; Andrew Sunil Rajkumar, Eleonora Cavagnero, Mirja Sjoblom, and Marion Cross; and Melissa Adelman, Tillmann Heydelk, Patrick Ramanantoanina, Axelle Latortue, and Marie Monique Manigat. The themes covered by the background papers produced by the World Bank include: the poverty profiles and evolution and poverty measurement, rural development, urban labor markets, the education sector, the health sector, shocks and vulnerability, social protection. The team at ONPES was led by Shirley Augustin (Coordinator) and comprised Pierre Jorès Mérat (Assistant Coordinator), Jean Malherbe Fritz Berg Jeannot, Ilionor Louis, Lewis Am pidu Clormeus, Josué Muscadin, Schmied St Fleur, Guy Alex Andre, Frantz Lamour, Hérard Jadotte, Dagobert Elisee, Lanier Sagesse, Emmanuel Michel David, Leonne Fatima Prophete (DPES/MPCE). The themes covered by the background papers produced by the ONPES include: the po verty profiles and evolution and poverty measurement, labor makets and the working poor; vulnerability to natural disaster, households coping strategies in the face of poverty. The overall coordination and drafting of the report was led by Federica Marzo (Economist, GPVDR) and Shirley Augustin (Coordinator, ONPES). Written comments were received from external peer reviewers, including Jean-Yves Duclos, (Université Laval, Quebec), Tadashi Matzumotu (Organisation for Economic Co-operation and Development), Nathalie Brisson-Lameute (Consultant), Michael Clemens (Center for Global Development) and World Bank peer reviewers, including Ana Maria Oviedo, Gabriel Demombynes, Tom Bundervoet, and Ana Fruttero. The editorial work was conducted by Robert Zimmermann. The joint ONPES/World Bank Poverty Assessment team would like to thank Haitian institu tions for the joint work done to produce the new official poverty line methodology used to base the analysis contained in this report, especially the Technical Inter-Institutional Com mittee led by ONPES and including the Haitian Institute of Statistics and Informatics (IHSI), the Direction of Economic and Social Planning (DPES) of the Ministry of Planning and Exter nal Cooperation (MPCE), the Fund for Economic and Social Assistance (FAES), and the Natio nal Food Security Coordination Unit (CNSA). The team would like to thank Michael Clemens (Center for Global Development) for his contribution to the study of remittances and migra tion. Finally, the team would like to thank the Organization of International Migration in Haiti for facilitating data collection in the Internally Displaced Camps within the framework of the Enquête sur les Conditions de Vie des Ménages après le Séisme (ECVMAS 2012). xiv WorldBank - ONPES Abbreviations ARI acute respiratory infection CAED Cadre de coordination de l’Aide Externe au Développement CIN Carte d’identification nationale (national identity card) CNSA Coordination nationale de la sécurité alimentaire (National Food Security Coordination Unit) DHS demographic and health surveys DPES Direction de Programmation économique et sociale (Direction of Economic and Social Planning) EBCM Enquête Budget et Consommation des Ménages 1999/2000 (household income and expenditure survey) ECVH Enquête des Conditions de Vie en Haiti 2001 (survey on living conditions in Haïti) ECVMAS Enquête sur les Conditions de Vie des Ménages après le Séisme 2012 (postearthquake household living conditions Survey) FAES Fonds d’assistance économique et sociale (Fund for Economic and Social Assistance) Fafo Fafo Institute for Applied International Studies (Norway) GDP gross domestic product IHSI Institut haïtien de statistique et d’informatique (Haïtien Institute of Statistics and Informatics) IR inverse relationship MMR maternal mortality ratio MPCE Ministère de la Planification et de la coopération externe (Ministry of Planning and External Cooperation) NDRMS Système National de Gestion des Risques et des Désastres (National Disaster Risk Management System) ONPES Observatoire national de la pauvreté et de l’exclusion sociale (National Observatory for Poverty and Social Exclusion) PAARP Plan d’Action pour l’Accélération de la Réduction de la Pauvreté (Action Plan to Accelarate Poverty Reduction) PPP purchasing power parity PSUGO Programme de Scolarisation Universelle Gratuite et Obligatoire (free and compulsory universal education program) Note: All dollar amounts are U.S. dollars ($) unless otherwise indicated. xv Investing in People to Fight Poverty in Haiti xvi Overview WorldBank - ONPES Despite a decline in both monetary and multidimensional poverty rates since 2000, Haiti remains among the poorest and most unequal countries in Latin America. Two years after the 2010 earthquake, poverty was still high, particularly in rural areas. This report establishes that in 2012 more than one in two Haitians was poor, living on less than $ 2.41 a day, and one person in four was living below the national extreme poverty line of $1.23 a day. Progress is evident, but much remains to be done. Extreme poverty declined from 31 to 24 percent between 2000 and 2012, and there have been some gains in ac cess to education and sanitation, although access to basic services is generally low and is characterized by important inequalities. Urban areas have relatively fared better than rural areas, reflecting more nonagricultural employment oppor tunities, larger private transfers, more access to critical goods and services and narrowing inequality compared to rural areas. Continued advances in reducing both extreme and moderate poverty will require greater, more broad-based growth, but also a concerted focus on increasing the capacity of the poor and vulnerable to accumulate assets, generate income, and better protect their livelihoods from shocks. Special attention should be given to vulnerable groups such as women and children and to rural areas, which are home to over half of the population and where extreme poverty persists, and in come inequality is increasing. 1. Introduction Haiti is a country of contrasts, where the challenges are matched by the opportunities. With a population of 10.4 million people living in an area of 27,750 km2, Haiti is one of the most densely populated countries in Latin America.1 While 22 percent of the total population lives in the Metropolitan area of Port-au-Prin ce, the capital, slightly over half (52 percent) lives in rural areas; the rest reside in other urban areas outside the capital.2 Haiti’s strategic position in the middle of the Caribbean Sea, its potential as a tourist destination, its young labor force, and its rich cultural heritage offer a wide range of economic and geopolitical oppor tunities. Despite this, the wealth generated in the country is largely inadequate to meet the needs of the people: today, Haiti’s per capita gross domestic product (GDP) and human development are among the lowest in Latin America and in the world (figure O.1).3 1 Based on available population projections of the Haitian Institute of Statistics and Informatics (IHSI 2012) and World Bank World Development Indicators (WDI). 2 All data in this briefing note are from the Enquête sur les Conditions de Vie des Ménages après le Séisme (postearthquake household living conditions survey, ECVMAS 2012), unless otherwise indicated. 3 Per capita GDP was $1,575 (purchasing power parity [PPP] U.S. dollars) in 2013. Haiti ranks 161 among 186 countries in the Human Development Index of the United Nations Development Programme. “Human Development Index (HDI) Value,” United Nations Development Programme, New York, https://data.undp.org/dataset/Human-Development-Index-HDI-value/8ruz-shxu. 1 Investing in People to Fight Poverty in Haiti Figure O.1. GDP per capita in Haiti and in Latin America per capita GDP (2011 PPP U.S. dollars), 2012 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Trin. and Tob. Bahamas Chile St. Kitts and N. Ant. and Bar. Uruguay Venezuela Mexico Barbados Suriname Brazil Costa Rica Peru D.R. St. Vinc. and G. St. Lucia Ecuador Dominica Belize Jamaica El Salvador Paraguay Guatemala Guyana Bolivia Honduras Nicaragua Haiti Sources: WEO (World Economic Outlook Database), International Monetary Fund, Washington, DC, October 2013, http://www.imf.org/external/pubs/ft/weo/2013/02/weodata/index.aspx; WDI (World Development Indicators) (database), World Bank, Washington, DC, http://data.worldbank. org/data-catalog/world-development-indicators. 2. Haiti in 2012: Monetary and multidimensional poverty Poverty is widespread in Haiti; in 2012, the overall poverty headcount was 58.5 percent, and the extreme poverty rate was 23.8 percent. The new poverty mea surement methodology developed by the technical agencies of the Haitian gover nment reveals that almost 6.3 million Haitians cannot meet their basic needs, and, among these people, 2.5 million are living below the extreme poverty line, meaning that they cannot even cover their food needs (box O.1).4 The incidence of poverty is considerably greater in rural areas and in the North, in particular.5 More than 80 per cent of the extreme poor live in rural areas, where 38 percent of the total population is not able to satisfy its nutritional needs, compared with 12 percent in urban areas and 5 percent in the Metropolitan Area (figure O.2). The poor are also geographically concentrated in the North, where the Nord-Est and Nord-Ouest Departments have an extreme poverty rate exceeding 40.0 percent (representing 20.0 percent of the overall extreme poor), compared with 4.6 percent in metropolitan Port-au-Prin ce (representing only 5.0 percent of the extreme poor). The incidence of poverty among both man- and woman-headed households is about 59 percent6; 43 percent of the population lives in woman-headed households.7 4 These rates are based on per capita consumption and were calculated using the 2012 official moder ate and extreme poverty lines of G 81.7 per capita per day ($2.41 PPP of 2005) and G 41.6 per capita per day ($1.23 PPP of 2005), respectively. 5 For the purpose of this study, Haiti is geographically divided into five regions: the North, the South, the Transversal (the Center), the Metropolitan Area, and the West. 6 Based on a linear regression on poverty correlates, the sex of household heads is not correlated with poverty in any location of residence. 7 This share is high for international standards, but is in line with other countries in the Caribbean region: Antigua, Barbados, Dominica, Grenada, Saint Kitts and Nevis, and Saint Lucia present a share of wom an-headed households above 40.0 percent (Ellis, 2003). 2 WorldBank - ONPES Box O.1. A new national poverty line for Haiti Using the new 2012 consumption data, for the first time the government of Haiti has produced a national poverty line, which thus becomes the new reference for the measurement, monitoring, and analysis of poverty in the country. Between October 2013 and February 2014 an interinstitutional technical commi ttee led by the National Observatory of Poverty and Social Exclusion(ONPES) and including the Haitian Institute of Statistics and Informatics (IHSI), the Fund for Eco nomic and Social Assistance (FAES), the National Food Security Coordination Unit (CNSA), and the Direction of Economic and Social Planning (DPES) of the Ministry of Planning and External Cooperation (MPCE) developed and certified the first official national poverty line for Haiti, with technical assistance from the World Bank,. The poverty line is inspired by the cost-of-basic-needs approach and has values of G 81.7 ($2.41 PPP of 2005) for the moderate poverty line and G 41.6 ($1.23 PPP of 2005) for the extreme poverty line. The data used to produce the line are derived from the Enquête des Conditions de Vie des Ménages Après le Séisme (post-earthquake household living conditions survey, ECVMAS 2012), the first li ving conditions survey conducted in Haiti since 2001. The poverty rates for 2012 and the associated profiles are therefore based on the new official national po verty lines. The new methodology developed by the technical agencies of the Haitian government reflects international best practice. Consumption is considered a better measure of well-being because it captures living standards more accu rately, unlike income, which generally underestimates well-being and overes timates poverty8. Figure O.2. Incidence of poverty and number of poor in urban and rural areas a. Poverty incidence Poverty Incidence - (% of population) Metropolitan area 80% 70% 60% 50% 40% 30% 20% 10% 0% Extreme poverty Poverty Other urban Rural Total 8 The poverty rates produced in 2001 by IHSI and FAFO (76% and 56%) were based on the international thresholds of 1 and 2 dollars a day (PPP) and on households income data. 3 Investing in People to Fight Poverty in Haiti b. Number of poor in rural and urban areas 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 - Non poor Poor Extreme poor Rural Metropolitan Area Other Urban Source: Official poverty rates, based on ECVMAS 2012; World Bank and ONPES calculations. Vulnerability is extensive in Haiti. One million people live slightly above the po verty line and could be pushed below the line by a shock; almost 70 percent of the population is either poor or vulnerable to falling into poverty (figure O.4).9 Only 2 percent of the population consumes the equivalent of $10 or more a day, which is the region’s income threshold for joining the middle class. A typical Haitian hou sehold faces multiple shocks annually, and nearly 75 percent of households were economically impacted by at least one shock in 2012. The extreme poor are more vulnerable to shocks and the consequences of shocks: 95 percent experienced at least one economically damaging shock in 2012. Natural disasters, in particular, have a great disruptive potential partly because they so heavily affect agriculture, which is the main source of livelihood for a large share of the population, especially in rural areas. Indeed, the evidence shows that the most common covariate shocks are weather or climate related, while the most important idiosyncratic shocks are health related.10 9 In the absence of panel or synthetic panel data, the vulnerable are defined as individuals living on a budget representing 120 percent of the poverty line: in other words, 20 percent higher than the poverty line. An alternative definition of vulnerability used by the World Bank for Latin America is tied to economic stability and a low probability of falling into poverty. The threshold corresponding to this probability is $10 PPP a day, which is therefore used to identify the middle class in the region, while the vulnerable are defined as individuals living on between $4 and $10 PPP a day. 10 Covariate shocks affect large shares of the population of entire communities (such as natural disasters or epidemics), while idiosyncratic shocks affect individuals (such as sickness, death, or job loss). 4 WorldBank - ONPES Figure O.3. Distribution of household per capita consumption (in Gourdes) Extreme line Moderate poverty line Number of individualsVulnerability line 200 180 160 140 120 100 80 60 40 20 0 500 8,000 0 15,50 23,000 30,500 38,000 45,500 53,000 60,500 68,000 75,500 83,000 90,500 98,000 105,500 113,000 112,500 120,500 128,000 135,500 143,000 Annual per capita comsumption in gourdes Sources: ECVMAS 2012 and official poverty lines; World Bank and ONPES calculations. 3. Improvements in monetary and multidimensional poverty Significant economic, political, and natural shocks throughout the last decade had important impacts on people’s well-being11. The available data on poverty are cross-sectional, implying that they provide snapshots of welfare at the beginning of the 21st century and in 2012, but do not allow a disaggregated analysis of how each of these shocks affected households. However, a comparison of these two points in time suggests that welfare did improve despite repeated shocks. In particular, at the national level, the extreme poverty rate declined from 31 to 24 percent between 2000 and 2012 (figure O.5).12 Improvements in urban areas drove this decline because the extreme poverty rate fell from 21 to 12 percent in urban areas and from 20 to 5 percent in the Metropolitan Area, but stagnated in rural areas, at 38 percent. While data from 2000 are not available to assess the relevant trends, moderate consumption poverty is also estimated to have modestly improved in the last decade.13 11 Among them the political crisis and floods of 2004, the hurricanes and increase in food prices of 2008, and the 2010 earthquake. 12 The 2000 poverty rates are from the Fafo Institute for Applied International Studies (2001), a Norwe gian research center, based on the IHSI Enquête Budget et Consommation des Ménages 1999/2000 (household income and expenditure survey, EBCM) (see (http://www.fafo.no/indexenglish.htm). The consumption poverty indicators for 2000 were calculated based on a national food poverty line estimated in a slightly different manner than the official 2012 methodology. The consumption aggregate in 2000 was developed using over 50 items in the food basket, while the 2012 aggregate was based on a food basket of 26 items that reflects 85 percent of the value of the food consumed among the reference population in all regions of Haiti (deciles 2–6). Furthermore, the aggregate for 2000 does not include imputed rents, while the aggregate for 2012 does. Simulations show that, even excluding imputed rents from the 2012 aggregate, the declining trend in extreme poverty holds. 13 Income-based measures suggest that moderate poverty declined from 77 percent in 2001 based on the Enquete des Conditions de Vie des Menages 2001 (survey on living conditions in Haiti 2001, ECVH 2001) to 72 percent in 2012 (ECVMAS 2012). Consumption-based poverty measures are considered the most accurate in capturing welfare levels, especially in countries with high rates of rural poverty and significant income volatility; the new, official Haitian poverty measure is consumption based. 5 Investing in People to Fight Poverty in Haiti Despite a slight decrease in overall Figure O.4. Evolution of extreme poverty in Haiti, 2000-2012 40% extreme poverty in Haiti, the number of poor remains extremely high, especially in rural areas. (% of population) 35% 30% 25% 20% 15% 10% 5% 31% 24% 38% 21% 20% 12% 38% 2000 2012 5% 0% National Rural Urban Metropolitan area Source: EBC 1999/2000, en FAFO (2011), seuils de pauvrete officels ECVMAS (2012) Nonmonetary welfare has also improved in Haiti since 2001 in both urban and rural areas (table O.1). The biggest gains have been in education, where participa tion rates among school-age children have risen from 78 to 90 percent. However, the quality of service delivery is a concern: because of a combination of late starts, dropouts, and repetitions, only one-third of all children aged 14 years are in the appropriate grade for their age. Table O.1. Access to basic services. Coverage rates, % Indicator National 2001 2012 Urban 2001 2012 Rural 2001 2012 School-age children in school 78 90 84 93 74 87 Access to improved drinking water sources WHO definitiona — 53 — 55 — 52 Access to tap water (in house) 7 11 13 18 3 5 Expanded definitionb — 73 — 91 — 56 Treated water (purchased) — 20 — 36 — 4 Access to energyc 32 36 62 63 11 11 Rate of open defecationd 63 33 44 11 76 53 Access to improved sanitatione — 31 — 48 — 16 Habitat, nonhazardous building materials 48 60 71 81 33 41 Sources: ECVH 2001; ECVMAS 2012; World Bank and ONPES calculations. Note: — = not available. WHO = World Health Organization. a. According to the international definition (WHO), access to improved drinking water is the proportion of people using improved drinking water sources: household connection, public standpipe, borehole, protected dug well, protected spring, rainwater. b. The expanded definition includes the international definition (WHO), plus treated water (purchased). c. Includes electricity, solar, and generators. d. Rate of open defecation refers to the proportion of individuals who do not have access to improved or unimproved sanitation. This indicator is part of the Millennium Development Goals (MDG) and is a key element of discussion for the post-2015 agenda The open defecation rate declined from 63 to 33 percent nationwide between 2000 and 2012, reflecting gains in both urban and rural areas. e. Improved sanitation is access to a flush toilet or an improved public or private latrine. 6 WorldBank - ONPES The quality of sanitation access, remains low: only 31 percent of the population had access in 2012 to improved sanitation overall, and 16 percent had access in rural areas.14 Access to improved sources of drinking water is similar in urban and rural areas, at 55 and 52 percent, respectively. However, most of the remainder of the urban population (36 percent) purchases safe water directly from vendors; the rest (9 percent) use unimproved sources of drinking water. Meanwhile, most of the remainder of the rural population (44 percent) does not have this option and uses unimproved water sources (river water or unprotected wells) with a high probabi lity of contamination. Access to energy (electricity, solar, or generators) expanded only slightly because of gains in urban areas, accompanied by stagnating levels in rural areas, which held at 11 percent. Over the same period, income inequality stagnated: the Gini coefficient was static at 0.61 beginning in 2001.15 The richest 20 percent holds more than 64 percent of the total income of the country, against the barely 1 percent held by the poorest 20 percent. However, this hides opposing trends in urban and rural areas, where inequality declined (from 0.64 to 0.59) and increased (from 0.49 to 0.56), respectively.16 These levels of income inequality place Haiti among the most unequal countries in Latin America and in the world (figure O.6). Figure O.5. Income inequality in Haiti and in Latin America, circa 2012 a. Gini inequality coefficient, Latin America 0.7 0.6 0.5 0.4 0.3 0.2 0.1 Haiti is one of the most unequal countries in the world, in terms of both incomes and outcomes. 0 Haiti Honduras Guatemala Colombia Brazil Paraguay LAC Panama Chile Mexico Costa Rica Bolivia Ecuador DR Peru Argentina El Salvador Uruguay 14 Improved sanitation includes flush toilets and improved latrines. According to the United Nations Children’s Fund and the World Health Organization, an improved sanitation latrine is one that hygien ically separates human excreta from human contact. 15 The Gini has been calculated using the income aggregate for 2001 and 2012, comprising household per capita labor income (including production for own consumption), nonlabor income, and imputed rent. The aggregate is built using the methodology of the Socio-Economic Database for Latin Ameri ca and the Caribbean, as illustrated in CEDLAS and World Bank (2012). 16 It is not possible to compare trends in consumption inequality because the 2000 estimate did not exclude outliers, which strongly affect inequality estimates. 7 Investing in People to Fight Poverty in Haiti b. Income share, income quintiles, Haiti 17.8 74.0 64.6 54.8 43.1 24.2 20.3 18.6 4.0 3.8 11.0 8.1 5.2 12.9 9.7 16.0 6.2 2.8 1.8 0.9 1 2 3 4 5 Haiti LAC average Haiti-urban Haiti-rural Sources: ECVMAS 2012; PovStat 2014; data of the Center for Distributive, Labor, and Social Studies. Note: Average inequality in Latin America is based on income aggregates. The same methodology has been used to measure inequality in Haiti. However, comparability is not perfect because of differences in the questionnaires used to capture income. Despite improvements in basic services access, the poor face significantly lar ger barriers in accessing basic services. In 2012, 87 percent of 6- to 14-year-olds in poor households were in school, compared with 96 percent of children in nonpoor households. In the same year, child mortality in the highest welfare quintile was 62 per 1,00017 live births, while it was 104 in the lowest income quintile. Similarly, the number of stunted children was four times greater in the lowest quintile relative to the highest.18. Fewer than 1 woman in 10 in the lowest quintile benefits from assisted delivery, versus 7 in 10 among the better off, which suggests that the poorest have limited access to maternal health services and are more likely to die during deli very.19 These facts show that poverty is an important barrier to both school enroll ment and health service utilization: in 83 and 49 percent of cases, respectively, cost is the main reason for keeping children out of school or not consulting a doctor if they are sick.20 Households bear most of the burden of education costs (10 percent of their total budgets). In contrast, household health expenditures are relatively li mited (less than 3 percent of total household budgets). These obstacles to invest ment in human capital are greater in rural areas, where poverty is more extensive and the supply of services more limited. 17 Health related data presented in this study are from the survey