Analysing Multi-faceted Poverty in Sri Lanka: An Econometric Analysis based on Household Data

Abstract

Poverty has been a global issue which affects all the countries irrespective of the development status. However, the situation of developing countries is remarkably adverse compared to developed counterparts as lower income groups in developing countries are suffering from the lack of income and other economics resources. This study attempts to understand the multi-faceted poverty in Sri Lanka by expanding the traditional two way of poverty categorisation into four ways – extreme poor, poor, vulnerable non-poor and non poor, in order to provide more precise policy recommendations. Ordered Probit Model (OPM) estimation was employed to examine the determinants of multi-faceted poverty using the Household Income and Expenditure Survey (2012/13) data. The results highlight that 1.4% of households are suffering from Extreme Poverty, while 9.3% and 73% households have been recognised as poor and non-poor respectively. The most crucial fact is that 16.2% are in vulnerable non-poor category who are at a greater risk of falling back into poverty due to any shock at micro or macro levels. The OPM estimates indicate that staying in urban and rural sectors, having higher educational attainments and secured employments, having agricultural lands and remittances essentially reduce the probability of falling into extreme poor and poor categories. Conversely, increased family size, elderly household heads and being a Tamil increase the probability of falling into both extreme poor and poor categories. current study strongly recommends promoting education, employment opportunities and providing agricultural lands to get them out of poverty while implementing appropriate safety nets that effectively target specially the Vulnerable NonPoor, Poor and Extreme Poor households.