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МИРОВАЯ ЭКОНОМИКА
УДК: 330.356 КАНТАРЧЯН РУБЕНСУРЕНОВИЧ
к.э.н., доцент кафедры
«Макроэкономика» Армянского государственного экономического университета,
e-mail: rughant@mail.ru
КАНТАРЧЯН ЛИЛИТ РУБЕНОВНА
к.э.н., ведущий аналитик, Национальный институт труда и социальных исследований РА,
e-mail: lilit.ghantarchyan@yahoo.com
АЙРАПЕТЯН АЛЬБЕРТ АРМЕНОВИЧ
к.э.н., ведущий аналитик, Национальный институт труда и социальных исследований РА,
e-mail: alberthayrapetyan@gmail.com
СПОСОБЫ УМЕНЬШЕНИЯ УРОВНЯ БЕДНОСТИ И УВЕЛИЧЕНИЯ ПРОПОРЦИИ СРЕДНЕГО КЛАССА В РА
Аннотация. Цель: опираясь на международный опыт борьбы с нищетой и оценивая статистически значимое влияние доходов (и отдельных его компонентов) бедных семей населения РА на потребление (и его отдельных компонентов) для определения существующих приоритетов социальной и рабочей политики в этой области, выделить решения. Структура/методический подход: для оценки статистически значимого воздействия каждого из источников дохода (продажи сельскохозяйственной продукции, семейных пособий, пенсий, денежных переводов, заработной платы и т. д.) использована серия двумерных регрессионных уравнений и их компоненты (пищевые продукты, непродовольственные товары, товары длительного пользования). Результаты. Уровень потребления малообеспеченных семей Армении в целом значительно зависит от заработной платы, доходов от самостоятельной занятости, пенсий, семейных пособий и продаж сельскохозяйственной продукции, а также изменений в денежных переводах. Семейное пособие становится решающим фактором, влияющим на общий уровень потребления, поскольку увеличение 10% семейных пособий может в среднем увеличить общее потребление на 10,22%. Между тем ожидаемое 10%-ное изменение общего дохода может привести к изменению общего потребления на 4,69%, в целом. Выводы. Деньги, полученные на внешних рынках труда, на рынке труда РА, а также из системы социального обеспечения РА, оказали статистически значимое влияние на уровень потребления (и его компонентов) бедных семей РА. Политика сокращения бедности в Армении должна осуществляться в рамках более эффективной миграционной политики, активной политики рынка труда и политики социальной защиты. Усиление системы социальной защиты значительно ускорит процесс сокращения уровня бедности в стране (в основном за счет увеличения количества семейных пособий). Практические выводы. Результаты могут быть использованы Министерством труда и социальных вопросов, различными донорскими организациями и лицами, заинтересованными в этой теме. Ключевые слова: бедность, источники дохода, потребление, социальная защита, рынок труда, активная политика на рынке труда.
KANCHA TR Y AN RUBEN SURENOVICH
Candidate of Economic Sciences, Assistant Professor of the Department of "Macroeconomics" of Armenian State University of Economics,
e-mail: rughant@mail.ru
KANTARCHYAN LILIT RUBENOVNA
Candidate of Economic Sciences, Lead Analyst, National Institute of Labor and Social Research of the Republic of Armenia,
e-mail: lilit.ghantarchyan@yahoo.com
A YRAPETYAN ALBERT ARMENOVICH
Candidate of Economic Sciences, Lead Analyst, National Institute of Labor and Social Research of the Republic of Armenia,
e-mail: alberthayrapetyan@gmail.com
THE WAYS TO REDUCE THE POVERTY RATE AND INCREASE THE PROPORTION OF THE MIDDLE CLASS IN THE RA
Abstract. Purpose: drawing upon the international experience in fighting poverty and by estimating the statistically significant impact of income (and its separate components) of the poor households of the RA on consumption (and its separate components) to identify the existing social protection and labor policy priorities in this area and highlight the solutions. Design/ methodological approach: series of bivariate regression equations were estimated with a view to estimate the statistically significant impact of each of the income sources (sales of agricultural products, family benefit, pension, remittances, salary and etc.) on the overall consumption expenditures and the components thereof (food items, non-food items, durables). Findings/ Results: the level of consumption of the Armenian poor households, in general, is significantly impact by salaries, self-employment income, pensions, family benefits, and sales of agricultural products as well as by changes in remittances. Family benefit is going to be the decisive factor influencing the overall level of consumption in that the family benefifs 10% increase could cause an increase in overall consumption by 10.22%, on average. Meanwhile the expected 10% change in total income could cause a 4.69 % change in total consumption, in general. Conclusions: Money received from foreign labor markets, the labor market of the RA and though the social security system of the RA had statistically significant impact on the consumption level (and its components) of poor households of the RA. The poverty reduction policies in Armenia have to be implemented in the framework of more effective migration policy, active labor market policies and social protection policies. The enhancement of social protection system will considerably expedite the process of reducing the poverty rate in the country (basically by means of increasing the amount of family benefits). Practical Implications: The findings can be used by the Ministry of Labor and Social Affairs, various donor organizations, and by those scholars who are interested in this topic.
Keywords: Poverty, sources of income, consumption, social protection, labor market, active labor market policy
Introduction. The solution to the issue of the poverty is of primary importance for the Armenian economy. After the independence, the Armenia opted for building and developing the market economy and this entailed issues that it had never confronted with before. These issues were conditioned by both objective and subjective reasons. Consequently, economy of the RA in the 1990-s found itself in a crisis situation which caused a consecutive growth in the poverty rate, drastic decrease in the living standards, shaping of polarized strata of society and deepening of antagonisms moulded between them, enlargement of the specific weight of the poor among the population. In a quest of a way -out, Government of the RA implemented a series of measures. Despite the positive effects of such measures on the social and economic areas, they were far from being considered satisfactory. The table below indicates the statistics on the poverty situation in the RA basing on the differentiation between the subgroups of the poor: very poor, extremely poor, and the nonpoor, taking account of their consumption as per an adult person.
The data from the above table 1 suggets that in 2015 poverty rate increased in 2.2 percentage points vis-à-vis 2008. The extreme poverty also developed an upward trend by about 0.4%. Remarkably, the global economic crisis affected basically the poor and the low-income groups of the Armenian population. Within two years, from 2008 to 2010, the poverty rate increased by 8.2% with 21.3%
accrueing on the very poor stratum, while the extremely poor accounted for 3%. Between 2010 and 2015, the poverty level decreased by 2% comprising 29.8%. The reduction of poverty is primarily due to the increase in the critical weight of the middle class of the population. Our investigation shows that the Armenian middle class faces considerable difficlulties over its formation. Basing on the data provided by the RA Statistical Agency, we have divided the general population into 3 groups (the 1-st — poor group accounting for 1-4 deciles of population, the 2-nd one or middle class — involving 5-7 deciles of population, and the 3-rd group, i.e. the rich, including the 8-10 deciles of population), and determined the distribution of money income among each group.
Table 1
Poverty indicies of Armenia*
Index 2008 2009 2010 2011 2012 2013 2014 2015
Poverty level (%) 27.6 34.1 35.8 35.0 32.4 32.0 30.0 29.8
Extreme poverty level (%) 1.6 3.6 3.0 3.7 2.8 2.7 2.3 2.0
Heatcount ratio (%) 5.1 7.8 8.1 7.9 5.6 5.9 4.5 4.7
Poverty gap (%) 1.4 2.4 2.5 2.4 1.6 1.7 1.3 1.3
Extreme (food) poverty line (AMD) 14403 14401 14402 14290 14289 14290 14289 14290
Lower total povetry line (AMD) 20844 20840 20939 21174 21114 21114 20996 20940
Upper total povetry line (AMD) 24411 25469 25238 24250 24358 24359 24605 25506
*Source: [14, p.31-33], [15, p.34-36], [16, p.35-36], [17, p.38-39], [18, p.36-39], [19, p.38-40], [20, p.40-42], [21, p.39 -41].
Table 2
The distribution of monetary income of Armenia per population group (%)*
Groups Income per capita
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Poor 14.3 15.1 17.0 16.8 16.8 16.5 16.6 16.6 16.1 16.6 16.0 16.4
Non-poor (middle class) 24.8 26.5 26.8 26.2 26.8 27.3 26.1 26.9 25.9 25.8 25.0 25.0
Rich 60.9 58.4 56.2 57.0 56.4 56.2 57.2 56.5 58.0 57.7 59.0 58.6
Total 100 100 100 100 100 100 100 100 100 100 100 100
*Source: [2, p. 93]; [3, p.105]; [4, p.105]. The calculations are done by the authors.
Table 2 suggests that incomes of the poor and middle classes enhance at the expense of the relocation of the incomes of the rich. In 2004-2015, the monetary income among the rich dropped by only 2.3 percentage points which entailed a 2.1 percentage point growth of the income share with the poor. The share of income of the middle class went up by 0.2 percentage point. It turns out that all over the above period the government focused mainly on the poor, while the middle class was discarded. Consequently, the increase of the monetary income was insignificant, thus suggesting that over the past decade there was no significant enhancement of the living standard of the Armenian population. Furthermore, Table 2 evidences that the Global Financial and Economic Crisis primarily hit the poor and the middle class, while the rich groups increased their incomes mainly at the expense of the money income of the middle class. Hence drawing upon the international experience in fighting poverty and by estimating the statistically significant impact of income (and its separate components) of the poor households of the RA on consumption (and its separate components) to identify the existing social protection and labor policy priorities in this area and highlight the solution to them. It will enable not only to increase the living standard of Armenian poor population, but also to add up to the empowerment of the middle class of the country population.
Literature review
The living standard of population is an economic notion, which allows forming a concept of the overall socio-economic pattern of the population. According to V.F. Meyer [11, p. 8] the living standard is the provision of the life of population with the necessary material and cultural (spiritual) goods, the degree of the consumption thereof, and the level at which these goods can satisfy the needs of people. M. Kh. Chobanyan [5, p. 6] claims that a living standard stands for the ensuring of the population with the necessary material and cultural goods, which determines their consumption rate and the rate at which their needs are met at the given stage of the development of society. However, K. Marx and F. Engels [10, p.150] demonstrate in their works that when discussing the issues relating to the living standard one has to take account of both meeting the physical needs and the satisfaction of those specific needs people live and are educated by. A. Marshall [9, p.108] points out that the increase in the living standard is associated with such a growth of consciousness, energy, and self-esteem that over the expenditure of means directs a person towards a maximum prudence and caution, making him exclude such expenses on food and drinks, which stimulate the appetite without enhancing the strength, and such activity, which inflicts both physical and moral damages. The interpretations of the notion "Poverty" are also different. The most popular version thereof is: inability to purchase the products and services contained in the consumption basket.
According to A. Smith, the development of any country is based on the population growth, which guarantees the reduction of poverty. Maltus found that the poverty is contingent upon the excessive growth of population and that precisely the poor are faulty at that. Where there is a population surplus and a lack of products necessary for survival, poverty is unavoidable. As K. Citro and R. Mitch-el [6, p. 97-98] view it, as poor can be rated the persons who have not resources to buy goods necessary for the consumption (e.g. clothes, food, or a house). This approach is based on the availability of resources, without indicating the quantity of the resources necessary and sufficient not to be categorized as poor. Morris [12, p. 35] states that the health condition of man can be the right yardstick to guage the latter's welfare. In the second half of the XIX-th H. Spencer [23] thought that poverty was a downright normal phenomenon. In his work he points out, that poverty and inequality arise and increase inasmuch as public production grows. However, it is unallowable to stop the production, hence poverty can't be eliminated either. More than this, in reality poverty has another measurement, another rationale. According to Spencer, it is not a social phenomenon, but rather a personal problem, that is individual choice and individual fate. In general, Spencer considered poverty to be a positive thing that stimulated an individual's development. The modern theories on poverty have a more comprehensive view. So according to Markosyan and Geghamyan[8, p. 97-123] the comprehensive concept of poverty embraces such factors as education and health care, possibility of the participation of a citizen in social and civil processes, freedom and security of a person, quality of the environment, etc. A expansive construction of poverty is suggested by Ames B., Brown W., Devarjan Sh., Izquierdo Al. [1, p.1-31]. They make the concept of poverty conditional on a long list of factors. Among them: low level of income and expenses (as a rule compared to the established poverty threshold), lack or insufficiency of production and personal property: low level of social capital; limited possibilites of a relevant education; low rate of social security; lacking rate of social representation for the poor and of advocacy for their interests and social rights. Worded differently, poverty stands for the inability to ensure the minimum requirements of biological, social, spiritual and cultural needs of an individual's life. The UN Office in Armenia [24, p.18] defines human poverty as the privation of such material and social possibilites that would ensure a long, healthy, and comfortable life of people. The World Bank [26] finds a person to be extremely or absolutely poor whose daily income below $1.9. Summarizing the above considerations, we can state that poverty as applied to the conditions of a given country and within a given timeframe, should be construed to be the households (hereinafter HH) with unavailable or lost sources of main income or the latter's restriction, that entails such a consumption rate which creates objective preconditions for the HH to qualify themselves as poor, being void of possibilities of self-fulfillment. By saying "objective", we mean the aggregate of material and nonmaterial goods which, based on the survey results, are required to provide for the average rate of welfare. Hence, by reviwing the international experience in fighting poverty and by estimating the statistically significant impact of income (and its separate components) of the poor households of the RA on consumption (and its separate components) we attempt to identify the
Региональные проблемы преобразования экономики, №12, 2017 existing social protection and labor policy priorities in this area and highlight the respective solutions
Design/methodological approach
An important tool in the overall reduction of poverty is a meticulous statistical estimation of the consumption characterictics of the poor and low-income households. Such estimations are supposed to assist the government in elaborating the alignment of respective measures and tools while deciding upon the amount of budget means to be allotted towards these actions The following models have been the basis for regression equations:
Total consumption costs of poor households = f (household income from sales of agricultural goods, income from family benefits, income from pension, transfers from relatives residing in Armenia, transfers from relatives residing outside of Armenia, earnings, self-employment incomes, income from debt (including loans and other borrowings)). (1)
Expenditures on foodstuff for poor households = f (household income from sales of agricultural goods, income from family benefits, income from pension, transfers from relatives residing in Armenia, transfers from relatives residing outside of Armenia, earnings, self-employment incomes, income from debt (including loans and other borrowings)). (2)
Expenditures on non-foodstuff for poor households =f(household income from sales of agricultural goods, income from family benefits, income from pension, transfers from relatives residing in Armenia, transfers from relatives residing outside of Armenia, earnings, self-employment incomes, income from debt (including loans and other borrowings)). (3)
Expenditures on long-term use of goods for poor households = f (household income from sales of agricultural goods, income from family benefits, income from pension, transfers from relatives residing in Armenia, transfers from relatives residing outside of Armenia, earnings, self-employment incomes, income from debt (including loans and other borrowings)). (4)
Total consumption of poor households = f (the sum of all incomes from all sources of poor households). (5)
Expenditures on non-foodstuff for poor households = f (the sum of all incomes from all sources of poor households). (6)
Expenditures on foodstuff for poor households = f (the sum of all incomes from all sources of poor households. (7)
Expenditures on long-term use of goods for poor households = f(the sum of all incomes from all sources of poor households). (8)
Expenditures on non-foodstuff for poor households = f (total consumption of poor households).
(9)
Expenditures on foodstuff for poor households = f (total consumption of poor households). (10) In this respect, it would not be reasonable to include all the income sources into a single regression equation due to the fact that different poor households received their money from different income sources. Hence, instead of multivariate regression equations a series of bivariate regression equations were estimated with a view to estimate the statistically significant impact of each of the income sources on the overall consumption expenditures and the components thereof.
All of the estimations were carried by applying the so-called "ordinary least-squares" method based on the microdata of the 2014 RASAs comprehensive anonymous study on the households [22; the calculations done by the authors] This type of estimations will enable to point the main approaches of the social policy towards the reduction of the poverty. Therefore, our analysis is anchored on the sources of bivariate regression equations. Prior to the estimation of the regression equations, all the outliers were removed. It was done through "Microsoft excel" program in the following manner: for each numerical row a median and a standard deviation was calculated, then the normalization was carried out through the "Standartization" function. All the results greater than 2.68 were considered as extreme and were removed. [25, p. 523] All variables are in logs. In the case of heteroscedasticity following the regression equations was tested and re-estimated with heterodescatisticity consistenet coeffecient covariance (through the «White» option). The dependent variables are as follows:
LTEXPi= log of overall consumption expenditures by a poor household i LFOODi= log of expenditures toward food products by a poor household i
LNFOODi= log of expenditures toward nonfood products by a poor household i LDURABLEi= log of expenditures toward the purchase of longlived commodities a the poor household i
The independent variables came to be these:
LAGRIPi= log of money received from sales of the agricultural products by a poor household i LBENEFITi= log of proceeds received from the family benefit by a poor household i LDEBTi= log of proceeds received from the debts (inclusive of credits and otherwise loans) by a poor household i
LPENSIONi= log of proceeds received from pension by a poor household i LRELATIVEi= logarithmic value of the of financial support received by a poor household I from the relatives residing in the RA
LREMITi= logarithmic value of the remittances of a poor household i LSALARYi= logarithmic value of proceeds received from the salaries of a poor household i LSEMPLi= logarithmic value of proceeds received from self-employment of a poor household i LTINCOMEi= logarithmic value of the aggregate of proceeds received from all sources by apoor household i
Findings/Results
After evaluating the equations, we have received the following results:
LF00Di=10.02+0.087*LAGRIPi (1)
(21.32)*** (1.90)* Number of Observations: 120 R-squared: 0.027438 Probability (F-statistics):0.059642 Note: Values of t statistics in breacets are *significant at 10% level, ***significant at 1% level
LNF00Di=10.15-0.007*LAGRIPi (2)
(17.67)*** (-0.123) Number of Observations: 138 R-squared: 0.000111 Probability (F-statistics):0.902598 Note: Values of t statistics in breacets are ***significant at 1% level
LTEXPi=10.43+0.092*LAGRIPi (3)
(23.09)*** (2.09)** Number of Observations: 136 R-squared: 0.031603 Probability (F-statistics):0.038400 Note: Values of t statistics in breacets are **significant at 5% level, ***significant at 1% level
LTEXPi= 11.47 - 0.036*LDEBTi (4)
(20.17)*** (-0.61) Number of Observations: 82 R-squared: 0.004593 Probability (F-statistics):0.545211 Note: Values of t statistics in breacets are ***significant at 1% level
LF00Di=10.75-0.02*LDEBTi (5)
(17.63)*** (-0.34) Number of Observations: 70 R-squared: 0.001650 Probability (F-statistics):0.738445 Note: Values of t statistics in breacets are ***significant at 1% level
LNF00Di=10.69-0.073*LDEBTi (6)
(11.59)*** (-0.77) Number of Observations: 81 R-squared: 0.007499 Probability (F-statistics):0.442070 Note: Values of t statistics in breacets are ***significant at 1% level
LF00Di=-0.72+1.124*LBENEFITi (7)
(-0.466) (7.45)*** Number of Observations: 244 R-squared: 0.316258 Probability (F-statistics):0.000000 Note: Values of t statistics in breacets are ***significant at 1% level
LNF00Di=-0.313+1.015*LBENEFITi (8)
(-0.186) (6.159)*** Number of Observations: 231 R-squared: 0.189144 Probability (F-statistics):0.000000 Note: Values of t statistics in breacets are ***significant at 1% level
LTEXPi=0.77+1.022*LBENEFITi (9)
(0.58) (7.89)*** Number of Observations: 234 R-squared: 0.352414 Probability (F-statistics):0.000000 Note: Values of t statistics in breacets are ***significant at 1% level
LFOODi = 8.77 + 0.183*LSALARYi (10)
(29 4)*** (7 159)*** Number of Observations: 556 R-squared: 0.091548 Probability (F-statistics):0.000000 Note: Values of t statistics in breacets are ***significant at 1% level
LTEXPi = 8.86 + 0.224*LSALARYi (11)
(27 3)*** (7 97)*** Number of Observations: 520 R-squared: 0.114477 Probability (F-statistics):0.000000 Note: Values of t statistics in breacets are ***significant at 1% level
LFOODi=9.04+0.15*LPENSIONi (12)
(18.1)*** (3.23)*** Number of Observations: 716 R-squared: 0.014701 Probability (F-statistics):0.001151 Note: Values of t statistics in breacets are ***significant at 1% level
LNFOODi = 8.56+ 0.134*LPENSIONi (13)
(12.15)*** (2.02)** Number of Observations: 694 R-squared: 0.005885 Probability (F-statistics) :0.043356
Note: Values of t statistics in breacets are ***significant at 1% level , **significant at 5% level
LTEXPi=9.59+0.146*LPENSIONi (14)
(19.2)*** (3.12)*** Number of Observations: 711 R-squared: 0.013553 Probability (F-statistics):0.001875 Note: Values of t statistics in breacets are ***significant at 1% level
LFOODi=5.57+0.439*LTINCOMEi (15)
(18.12)*** (16.86)*** Number of Observations: 1185 R-squared: 0.306444 Probability (F-statistics):0.000000 Note: Values of t statistics in breacets are ***significant at 1% level
LNFOODi = 3.58+0.557*LTINCOMEi (16)
(7.25)*** (13.16)*** Number of Observations: 1101 R-squared: 0.221465 Probability (F-statistics):0.000000 Note: Values of t statistics in breacets are ***significant at 1% level
LDURABLEi=8.36+0.083*LTINC0MEi (17)
(2.70)*** (0.33) Number of Observations: 80 R-squared: 0.001217 Probability (F-statistics) :0.758713 Note: Values of t statistics in breacets are ***significant at 1% level
LTEXPi=5.74+0.469*LTINCOMEi (18)
(16.77)*** (16.1)*** Number of Observations: 1152 R-squared: 0.342226 Probability (F-statistics):0.0000 Note: Values of t statistics in breacets are ***significant at 1% level
LFOODi=0.12+0.95*LTEXPi (19)
(0.77) (65.9)*** Number of Observations: 1119 R-squared: 0.795620 Probability (F-statistics): 0.0000 Note: Values of t statistics in breacets are ***significant at 1% level
LTNOODi=-2.34+1.107*LEXPi (20)
(-6. 605)*** (35.24)*** Number of Observations: 1116 R-squared: 0.594628 Probability (F-statistics): 0.0000 Note: Values of t statistics in breacets are ***significant at 1% level
LFOODi= 8.7+0.176*LREMITi (21)
(16.6)*** (3.65)*** Number of Observations: 157
Coefficent of Determination (R-square): 0.079008 Probability (F-statistics): 0.000362 Note: Values of t statistics in breacets are ***significant at 1% level
LN0NF00Di=8.37+0.142*LREMITi (22)
(10.9)*** (2.01)** Number of Observations: 155 R-squared: 0.025781 Probability (F-statistics):0.045954 Note: Values of t statistics in breacets are ***significant at 1% level, **significant at 5% level
LTEXP=8.85i+0.206*LREMITi (23)
(17.57)*** (4.6)*** Number of Observations: 169 R-squared: 0.132102 Probability (F-statistics):0.000001 Note: Values of t statistics in breacets are ***significant at 1% level
LF00Di=10.6-0.04*LRELATIVEi (24)
(11.64)*** (-0.44) Number of Observations: 41 R-squared: 0.004989 Probability (F-statistics):0.660796 Note: Values of t statistics in breacets are ***significant at 1% level
LTEXPi=10.46+0.04*LRELATIVEi (25)
(8.43)*** (-0.31) Number of Observations: 28 R-squared: 0.003684 Probability (F-statistics) 0.758998 Note: Values of t statistics in breacets are ***significant at 1% level
LTEXPi=8.59+0.24*LSEMPLi (26)
(11.37)*** (3.78)*** Number of Observations: 115 R-squared: 0.125083 Probability (F-statistics):0.000106 Note: Values of t statistics in breacets are ***significant at 1% level
LFOODi=8.46+0.215*LSEMPLi (27)
(10.07)*** (2.92)*** Number of Observations: 115 R-squared: 0.088566 Probability (F-statistics):0.001238 Note: Values of t statistics in breacets are ***significant at 1% level
LNFOODi=7.08+0.284*LSALARYi (28)
(15.35)*** (7.12)*** Number of Observations: 506 R-squared: 0.095273 Probability (F-statistics):0.000000 Note: Values of t statistics in breacets are ***significant at 1% level
LNFOODi=8.9+0.09*LRELATIVEi (29)
(6.4)*** (0.68) Number of Observations: 47 R-squared: 0.010306 Probability (F-statistics): 0.497143 Note: Values of t statistics in breacets are *** significant at 1% level
LNF00Di=7.06+0.291*LSEMPLi (30)
(6.11)*** (2.86)*** Number of observations: 113 R-square: 0.099032 Probability (F-statistics): 0.000687 Note: Values of t statistics in breacets are ***significant at 1% level
In statistical terms, the overall level of consumption of the Armenian poor households, in general, is significantly impacted by the proceeds received from salaries, self-employment, pension benefits, family benefits, and agricultural products marketing as well as by fluctuations in transfers received from abroad (If no source is indicated, then the source is table 3). However, the family benefit is going to be the decisive factor influencing the general rate of consumption in that the family benefit's slated 10% increase will entail the growth in overall consumption rate by 10.22%. Meanwhile the expected 10% change in total income will result in 4.69% change in the overall consumption rate. Furthermore, in case of a change in the income generated by salary and self-employment as well as in case of a similar percentage change of the total income, the Armenian poor households are likely to have a higher average change in percentage, with regard to the consumption of nonfood commodities and services rather, than in terms of consuming the foodstuff (in percentage terms). If anything, other things being equal, the change taken together of all sources of income as well as the similar percentage change of the total income will have more sway over the change of the overall consumption rate than over the change in the foodstuff consumption rate. Perhaps an exception will be the pension benefit whose change, other conditions being equal, will have a greater impact on the consumption of foodstuff than on the general rate of consumption. As regards the debts and/or loans, then the change in their volume is not supposed to bring about a statistically significant change, which can be explained as follows:
1. The HHs normally resort to credits or loans to maintain the current consumption rate, and not to expand the volumes thereof.
2. The HHs basically take credits or loans to repay the debts on their previous loans.
It is worth noting that only provided the percentage change of the family benefits is in place can it be possible to expect that the overall consumption rate along with its components will change more ( in terms of percentage points) than the amount of the family benefit itself has changed ( in percentage terms). This phenomenon can be due to the fact, that change of the amount of the family benefit can be considered as a "supplementary and/or unearned income"; accordingly, the benefits received will immediately and entirely channeled toward boosting the consumption rate.
Apart from that, the increase in the family benefit allegedly enables the poor HHs to purchase additional food and nonfood commodities at the expense of gains received from other income sources. Basing on the considerations set forth in the foregoing we can claim that the income of the Armenian poor HHs is affected by the following major channels:
1. Overseas labor markets.
2. RA labor market.
3. Social Prorection system.
Consequently, the reduction of poverty in the RA has to be conducted within the context of the following policies:
1. Migration policy.
2. Active labor market policy (including projects on the change of the status in which case the main source of income of the HHs receiving family benefits becomes the salary.
3. Social protection policy.
Table 3
The results of assessment and the description of income sources of the poor households in 2015*
Income source Average income of a household (AMD) The number of poor households in the sample (having concrete income source) The share of an income source in total income The expected impact of 10% change of income (in %) The expected impact of 10% change of income (in AMD)
On food consumption On non-food consumption On durables On total consumption On food consumption (53089) On non-food consumption (32123) On durable consumption (2689) On consumption level (88214)
Salary 133304 571 69.3% 1.83 2.84 - 2.24 971.5 912.3 - 1976.0
Self-employment 101801 107 54.8% 2.15 2.91 - 2.5 1141.4 934.8 - 2205.4
Pension 51795 719 47.4% 1.5 1.34 - 1.46 796.3 430.4 - 1287.9
Family benefit 27698 242 32.0% 11.24 10.15 - 10.22 5967.2 3260.5 - 9015.5
Income from the sale of agricultural products 53033 169 34.4% Nonsignificant Nonsignificant - 0.92 Nonsignificant Non-significant - 811.6
Income from relatives living in Armenia 25098 41 29.6% Nonsignificant Nonsignificant - Nonsignificant Nonsignificant Non-significant - Nonsignificant
Income from abroad (transfers) 73684 144 46.3% 1.76 1.42 - 2.06 934.4 456.1 - 1817.2
Debt and/or credit 26221 92 30.6% Nonsignificant Nonsignificant - Nonsignificant Nonsignificant Non-significant - Nonsignificant
Total 143580 1189 100.0% 4.4 5.57 0.83 4.69 2335.9 1789.3 22.3 4137.2
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In case the RA government prioritizes the active labor market policy as the advantage toward reducing the poverty rate, then the government will have to accentuate the importance of enhancing the labor market. [7, p. 66-67] This approach is expensive, but the expenses can be retrieved to the state budget, in particular, through the income tax and turnover tax (given the Small and Medium-Sized Enterprizes Assistance Projects have been put in place prior to that). In summary, as demonstrated above (Table 3) through the regression equations, the enhancement of social protection system will considerably expedite the process of reducing the poverty rate in the country (by means of increasing the amount of family benefits). Largely, the involvement of possibly larger number of HHs in the scope of family benefits will considerably improve the overall picture in terms of reducing the poverty rate. However, to pull this off one will have to provide for the availability of one of the following precondnitions:
1. The RA has to ensure a quite high rate of economic growth, which will enhance the budget receipts enabling the government to increase the expenditures toward social security.
2. Sustainable level of the RA national debt or its insignificant growth.
In terms of the first precondition, one has to note that the expenditures towards social security in 2014 constituted 15.2% while in 2015 they were 12.0% (their share in the state budget expenses being 7.1 and 7.6 respectively) [28, p.11-13]. Furthermore, in 2015 the number of HHs receiving family benefits, quarterly and lump-sum allowance grew considerably [29, p.17]. Hence the RA government' s expenditures on the social security, given the tax receipts to the state budget are sustainable or slightly increased, is only feasible through an incrementation of the national debt (especially of the external debt). With regard to the second precondition, one must be mindful of the fact that in contrast to 2013 when the gross unrepaired debt of the RA government was at AMD 1860.3 bln, it as at third quarter of 2016 amounted to AMD 2652.5 bln with the external debt equating USD 4659.0 mln [30]. As for servicing the external debt, the most critical point will be 2020 as it will be necessary to allocate $700 mln toward the debt service [7, p.20]. At that time, the maintenance of the rate of social security expenditures will pose a particular difficulty for the RA government, unless the rate of economic growth reaches a fairly high notch. Likewise, it is important to preclude both internal and external debt from drastic growing.
Consequently, under this condition the government shall abide the following guidelines:
1. Prioritize the proactive employmentpolicy (possibly enhancing also the funding), in order to ensure that possibly larger numbers of the unemployed and the poor (particularly the able-bodied members of HHs included on the list of family benefits) get their employment. The like policy will give the government an opportunity to increase the volume of budget receipts, especially if the implementation of the proactive employment policy is accomopanied by a tangible economic growth.
2. The status of a beneficiary to the family benefit system or other social support project becomes conditional.
Conlusions
The level of consumption of the Armenian poor households, in general, is significantly impacted by salaries, self-employment income, pensions, family benefits, and sales of agricultural products as well as by changes in remittances. Family benefit is going to be the decisive factor influencing the overall level of consumption in that the family benefit's 10% increase could cause an increase in overall consumption by 10.22%, on average. Meanwhile the expected 10% change in total income could cause a 4.69 % change in total consumption, in general. Money received from foreign labor markets, the labor market of the RA and though the social security system of the RA had statistically significant impact on the consumption level (and its components) of poor households of the RA. The poverty reduction policies in Armenia have to be implemented in the framework of more effective migration policy, active labor market policies and social protection policies. In case the government prioritizes the active labor market policy as the mean to reduce the poverty rate, then it will have to accentuate the importance of enhancing the labor market. This approach is expensive, but the expenses can be retrieved to the state budget, in particular, through the income tax and turnover tax. The enhancement of social protection system will considerably expedite the process of reducing the poverty rate in the country (by means of increasing the amount of family benefits). Largely, the involvement of possibly larger number of HHs in the scope of family benefits will considerably improve the
overall picture in terms of reducing the poverty rate.
Hence, the government can prioritize the active labor market policy, in order to ensure that possibly larger numbers of the unemployed and the poor (particularly the able-bodied members of HHs included on the list of family benefits) get their employment; and make the status of a beneficiary to the family benefit system or other social assistance program conditional.
Practical Implications
The findings can be used by the Ministry of Labor and Social Affairs, various donor organizations, and by those scholars who are interested in this topic.
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