A Profile of Poverty in Egypt: 1997

Poverty reduction is arguably the ultimate goal of all development, and by implication, of development policy. This research study presents a profile of poverty in Egypt for 1997. It assesses the magnitude of poverty and its distribution across geographic and socioeconomic groups, provides information on the characteristics of the poor, illustrates the heterogeneity among the poor, and helps identify empirical correlates of poverty.

This poverty profile is constructed using data (version 2) from the recently completed Egypt Integrated Household Sur- vey (EIHS). The EIHS, which is a nationwide, multiple-topic household survey, was carried out by the International Food Policy Research Institute (IFPRI) in coordination with the Ministry of Agriculture and Land Reclamation (MALR) and the Ministry of Trade and Supply (MOTS).

Throughout this paper our measure of individual welfare is per capita consumption, which is measured as the sum of total food consumption, total nonfood nondurable good expenses, estimated use value of durable goods, and an actual or imputed rental value of housing. In estimating poverty, this paper follows the cost of basic needs methodology to construct region-specific poverty lines. The reference poverty line varies for each of the following five regions: Metropolitan, Lower urban, Lower rural, Upper urban, and Upper rural. Differences in the poverty lines reflect variations in the food and nonfood prices across the five regions. They also incorporate regional differences in the size and age composition of the relatively poor households, and their food and non-food consumption preferences.

About 15.7 million persons, or about 26.5 percent of the population, are deemed to be poor in Egypt in 1997. (This estimate relies on the 1996 CAPMAS census population estimates and a poverty line corresponding to normative thresholds equivalent to 3,150 calories per day for an adult male in urban areas and 3,500 calories per day for an adult male in rural areas, while also allowing for basic nonfood expenditure). Of these, 5.1 million are deemed to be ultrapoor. (This estimate is based on the same population numbers and uses a lower poverty line that corresponds to the same caloric norms, but makes a less generous allowance for basic nonfood expenditure.)

...the study estimates that there were 15.7 million poor Egyptians in 1997, about 26.5 percent of the population. Making a less generous allowance for basic nonfood expenditure, 5.1 million of these poor were deemed to be ultrapoor.

Poverty rates are observed to be significantly higher in the rural sector, and about 63 percent of the poor live in rural areas. The rural sector accounts for about the same proportion of national poverty for the different measures of poverty, including the poverty-gap and squared poverty-gap index. When considering different poverty lines, this proportion does change as the rural sector comprises about 74 percent of the ultrapoor.

Our results indicate a sharp sectoral difference in poverty with rural areas being significantly poorer, but we do not find significant differences in poverty between Upper and Lower Egypt. In this respect our findings depart from the conventional wisdom that Upper Egypt is substantially poorer than Lower Egypt. One important reason for the difference in our results is that ours is perhaps the only study that allows for regional differences in cost of living (and basic nonfood needs). Conventional wisdom has been founded on poverty studies that have ignored spatial price differentials. Indeed, when we suppress spatial differences in poverty lines, we can reproduce a regional poverty profile that is more in accordance with conventional expectations.

Other aspects of the Egyptian poverty profile indicate that, on average, the poor tend to have larger household sizes and higher dependency ratios. The higher dependency ratios for the poor, however, are almost entirely on account of the extra children, rather than the aged, that they have to support per adult of working age. We find that the poor are more likely to live in dwellings without permanent walls or roofs, and the urban poor are somewhat more likely to live in dwellings they don't own.

The poor's access to infrastructure and public facilities (measured by the travel time to the nearest facility) tends be similar to that of the nonpoor. The relevant distinction here seems to be between the ultrapoor and the rest. The ultrapoor have substantially more limited access to facilities such as schools, hospitals, and markets, but have closer access to agricultural extension and cooperatives, and village banks.

We also find that female-headed households are more likely to be poor and also have higher measures of the depth and severity of poverty. In the urban sector, 33 percent of female-headed households are living in poverty, while about 22 percent of male-headed households are poor. In the rural sector, the head-count indices are 36 percent for female-headed and 28 percent for male-headed households. The differences in the measures of the depth and severity of poverty are not statistically significant (reflecting in part the relatively small number of female-headed households in the sample), while the difference in the incidence of poverty across male- and female-headed households is statistically significant.

The poor and the nonpoor tend to have similar rates of labor force participation, although female participation rates are only about one-fourth to one-third the male participation rates. On the other hand, of those who are labor force participants (either working or available for work), unemployment rates tend to be higher for the poor than for the nonpoor. Far more striking however are the differences in the male and female unemployment rates, the latter being more than four times higher, despite the already low female participation rates.

In terms of the primary occupation, the poor tend to be concentrated in relatively low-paying jobs in the casual labor market. This is particularly true of poor males. Poor women, if they are not unemployed, tend to be evenly split between casual wage and regular salaried employment. In terms of the primary industry of employment, the poor are overrepresented (relative to working population as a whole) in the construction, agriculture, and the trade and services sectors, while they are underrepresented in the manufacturing, community and personal services sector. Correspondingly, poverty rates are found to be highest among those dependent on the construction, agricultural, and the trade and services sectors for their livelihood. We do not find evidence of a sharp poverty profile by industry of employment, although we do find that those dependent on the community and personal services sector have significantly lower rates of poverty than those dependent on agriculture, construction, and trade and services. These results suggest that policies promoting the latter three sectors are likely to be more important to the poor.

Within the rural sector, we find that noncultivators are significantly poorer than cultivators, and conditional on cultivation, there is an inverse relation between per capita land cultivated and consumption poverty.

Our analysis also looked into performance indicators in the social sectors. For instance, our results on child immunization revealed a slightly larger deficit of the poor in the full immunization rates for their children relative to the children from non-poor households. One of the more striking set of findings relates to the differences between the poor and the nonpoor in their educational attainments. Our results indicate a significant literacy and schooling gap between the poor and the nonpoor. On average the poor have 2.6 fewer years of schooling than the nonpoor, and their literacy rate is 27 percent lower than the nonpoor. The poor-nonpoor education gap cuts across sector and gender categories. Equally there is a stark gender education gap that cuts across sector and poverty levels. Thus, only a third of the poor females (15 years and older) can read or write, while more than 60 percent of poor males can read and write. Better education is an important non-income dimension of welfare, and hence there is a strong case for raising educational attainments nationwide. The case for closing the education gap of the poor is even stronger. Our results also indicate that augmenting educational attainment of the poor does not require building more schools, but reducing the poor's opportunity cost of attending schools and increasing their returns from extra schooling, both suggesting the importance of income-generating activities as a policy instrument.

Poverty profiles are descriptive tools of analysis that provide broad pointers to policymakers, and are arguably an indispensable first stage of sound policy analysis. The characterization of poverty in Egypt presented in this study provides many examples of such pointers, and we hope it has set the stage for the next round of antipoverty policy analysis.

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