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This paper simulates the welfare and poverty impacts of the COVID-19 pandemic in the Islamic Republic of Iran, emphasizing the role of inflation, which lowered the purchasing power of households and had heterogeneous impacts across the distribution and in different regions of the country. First, income losses are estimated with a microsimulation analysis based on shock scenarios. Second, combining data on price changes with expenditure baskets for various groups of households, group-specific price indices are calculated. These are then applied to the post-shock income changes to assess the deterioration of living standards associated with inflation. Poverty substantially increases, by up to 21 percentage points, as a combined result of the fall in household incomes and high inflation through the pandemic. Iranians in the bottom half of the welfare distribution, those working in services and high-contact economic sectors, and those in rural areas are disproportionately affected.

Facing a fiscal crisis, the Islamic Republic of Iran decided to increase gasoline prices at the end of 2019. This paper estimates the impact of the price increase on household welfare and government revenue, using the most recent Household Expenditure and Income Survey conducted by the Statistical Center of Iran in March 2018-March 2019. The paper looks at the direct and indirect impacts of the reform and quantifies the compensatory cash transfer program the government instituted. Despite very regressive gasoline subsidies benefitting the rich the most, the increase in gasoline prices is found to affect the poor to a greater extent due to larger negative indirect impacts as well as their relatively low incomes. In total, poverty is estimated to increase by about 2.9 percentage points, with the direct impact accounting for a third of this increase. The proposed government scheme, if targeted perfectly to the poorest 18 million households, would fully compensate the poorest bottom 50 percent of the population and reduce poverty to below pre-reform levels. The annual cost of the program will be around 338 trillion rials, which accounts for 77 percent of the estimated total savings from the subsidies reform (439 trillion rials).

This paper identifies gaps in availability, access, and quality of household budget surveys in the Middle East and North Africa region used to measure monetary poverty and evaluates ways to fill these information gaps. Despite improving public access to household budget surveys, the availability and timeliness of welfare data in the Middle East and North Africa region is poor compared to the rest of the world. Closing the data gap requires collection of more HBS data in more countries and improving access to data where it exists. However, when collection of consumption data is not possible, a variety of other second-best strategies can be employed. Using imputation methods can help to measure monetary poverty. Constructing non-monetary poverty and asset indexes from less robust surveys, using non-traditional surveys such as phone surveys, and "big data"—administrative records, social networks and communications data, and geospatial data—can help substitute for, or complement data from existing traditional survey data.

This poverty diagnostic documents changes in welfare and living standards in the West Bank and Gaza over the period 2011 to 2017. Since the last poverty assessment for these territories, in 2011, the economic constraints facing them have worsened. The 2011 poverty assessment covered the period from 2004 to 2009, spanning the end of the second Intifada, as well as the 2007 internal divide in Gaza. The current diagnostic draws on the 2011 and 2017 Palestinian expenditure and consumption surveys (PECS) to assess key welfare trends and highlight areas for further investigation. The principal goal of this is to be timely and actionable, given the worsening outlook in the territories and the urgency of an effective response.

Facing a fiscal crisis, Jordan initiated substantial petroleum subsidy reforms in 2012. The government has also long contemplated how to cut electricity subsidies, which surpass the fiscal burdens imposed by the petroleum subsidies. This paper estimates the impacts of the 2012 petroleum subsidies reform on household welfare and government revenues. It also simulates the distributional and fiscal impacts from ending subsidies in the electricity sector, where the pricing structure is more complex than petroleum prices. The paper looks at the direct and indirect impacts of reform. Moreover, the paper discusses the political economy considerations of reform. While the full removal of petroleum subsidies would have increased poverty, the compensatory cash transfer program the government instituted is estimated to have fully offset the negative impact for the poorer population. The impact of reforms in the electricity sector will depend significantly on the implementation method chosen. A flat increase of tariffs toward cost recovery will put a huge burden on the poorest households. However, a progressive increase in tariffs will generate substantial savings for the government, even with compensatory mechanisms to mitigate the strong negative impact on the vulnerable population. The immediate compensation of the losers from reform appears to be a crucial factor in the successful implementation of reforms in Jordan.

Subsidizing fuel products and electricity has a long history in Yemen. Falling hydrocarbon revenues and the increasing fiscal deficit in 2014 urged the government to adjust fuel prices and initiate subsidies reform. This chapter explores the distributional and fiscal impacts of different reform options including the actual increase in prices in August 2014, focusing on fuel and electricity subsidies. The distributional analysis shows that only kerosene subsidies are pro-poor, and that subsidies for other products are pro-rich. Full removal of the remaining subsidies on LPG, diesel, and gasoline is expected to generate a negative impact increasing poverty by 1.1 percentage points. Full removal of subsidies on electricity is not a feasible option to consider. Instead, a more realistic reform would be introducing more brackets and a progressive increase in tariffs partially removing electricity subsidies. In terms of political economy, the history of unsuccessful reforms in Yemen suggests that successful implementation of subsidies reforms depends crucially on the right timing and a sound compensation scheme with targeted benefits. In addition, adequate public campaigns are needed to inform the public about the benefits of reforms. Finally, introducing automatic adjusting mechanisms of domestic prices to international commodities prices by law may reduce the politicians’ ability to manipulate prices.

This paper constructs and tests the robustness of consistently measured poverty trends in the Islamic Republic of Iran after 2008, using international poverty lines based on U.S. dollars at 2011 purchasing power parity. The constructed estimates reveal three distinct periods of welfare in the Islamic Republic of Iran: increase in poverty and inequality between 2008 and 2009, decline in poverty and inequality between 2009 and 2012, and gradual deterioration of both indicators again after 2012. The results are robust regardless of the choice of welfare aggregate, inclusion or exclusion of different components, and spatial adjustment accounting for regional variation in food and housing prices.

This paper is the first to systematically test the robustness of shared prosperity estimates to different methodological choices using a sample of countries from all regions in the world. The tests that are conducted include grouped versus microdata, nominal welfare aggregate versus adjustment for spatial price variation, and different treatment of income with negative and zero values. The empirical results reveal an only minimal impact of the proposed tests on shared prosperity estimates. Nevertheless, there are important caveats. First, spatial adjustment can change the ranking of households, affecting the distribution of the population in the bottom 40 percent. Second, the negligible impact of spatial deflation holds only if price adjustments are carried out consistently over time. Finally, the treatment of negative and zero income numbers can potentially lead to substantial differences in shared prosperity, depending on the magnitude of negative income and the share of households with negative and zero numbers across years.

This article uses two representative household budget surveys from the Kyrgyz Republic to analyze factors influencing participation and returns from different types of nonfarm activities in 2005 and 2006. We use the double hurdle and Heckman models, which allow us to demonstrate that a number of variables has different effects on participation and income from nonfarm activities. For example, residing in remote areas and lack of capital are found to stimulate participation in nonfarm activities, but decrease nonfarm income. Results are robust, but using the Heckman model seems to produce more accurate results for returns to education and gender under the presence of selection bias. Overall, nonfarm activities are found to be most important for the poor, who are pushed out of agriculture due to limited and poor land resources. This indicates that equipping poor households to enable them to move towards better remunerative nonfarm activities should be a priority for Kyrgyz rural policy makers.

This paper focuses on the function of Inter-ministerial Policy Coordination (IMPC) and its critical role in governance. Following a definitional section, the authors give an overview of public sector governance in Eastern and Central Europe and Central Asia and discuss the application of governance principles to Inter-Ministerial Policy Coordination in these regions. They conclude with specific examples from the Republic of Macedonia and Central Asia.

As the Arab Spring unfolded and political unrest spread across the Arab world, Jordan faced an adverse economy as well. Fundamental to the economic challenge was high and rising energy prices, already heavily subsidized for consumers. With the government intent on staving off emerging political unrest through a series of measures, buffering consumers from increased energy prices being a key action, fiscal costs mounted. By 2012, subsidies on petroleum products alone were about 2.8 percent of GDP and 8.8 percent of government expenditures. At the same time, political unrest disrupted the supply of natural gas from Egypt and Jordan abruptly had to switch to using imported oil products (heavy fuel oil and diesel) to produce electricity. Consequently, the cost of producing electricity increased several folds. As the increased cost was not passed on to the consumers, National Electric Power company (NEPCO), bore all the increases in fuel prices and accumulate debt as a result. At approximately 17 percent of government expenditures and 5.5 percent of GDP in 2011, this was twice the amount of the petroleum subsidies. The chapter is organized as follows. Section two traces the evolution of subsidies in Jordan in recent times. The distributional impacts of reform would depend on how important the subsidized items are to consumers in terms of their expenditures on those items. Section three discusses this question from the perspective of richer and poorer households. The distributional impacts of reform would of course not only depend on how much consumers spend on the subsidized items but also on the extent of price changes. Sections four and five simulate direct and indirect impacts of potential reform scenarios across the income distribution. From this discussion, in section six the chapter moves onto considering how reforms are weighed down by vexing political economy constraints. In MENA countries, universal subsidies have been in place as part of the government’s role in ensuring stability in the lives of the people and doing away with them is not straightforward.

Tajikistan was one of the fastest growing countries in the Europe and Central Asia region during the last decade. The economic growth was widely shared by the population and as a result poverty (measured by the national poverty line) declined from 73 percent in 2003 to 47 percent in 2009 accompanied by falling inequality. Consumption growth of the bottom 40 percent of the population -- a measure of shared prosperity proposed by the World Bank- was positive, pointing out that the growth was shared among the less well off. This work presents a diagnostic of shared prosperity and poverty reduction in Tajikistan during 2003-2009. The paper also focuses on quantifying the main drivers of poverty reduction, shared prosperity, and intra-generational mobility (class transitions). Some of the mechanisms of poverty reduction are explored in detail. Finally, main impediments to inter-generational mobility are discussed.

Turkey's poverty reduction performance in the 2000s has been remarkably consistent. Extreme and moderate poverty have fallen considerably since 2003. Between 2002 and 2011, extreme poverty fell from 13 percent to 5 percent, while moderate poverty halved from 44 percent to 22 percent (respectively, defined using the World Bank's Europe and Central Asia regional poverty lines of 2.5 and 5 USD/PPP). Most of this poverty reduction (89 percent) has been driven by growth, a performance consistent with most countries in Europe and Central Asia. This is substantially different form the recent performance of other regions, such as Latin America, where redistribution contributed to poverty reduction almost four times more than in Turkey. Turkey has also achieved sustained consumption growth of the bottom 40 percent of the population, even during the years of the world recession. Turkey's performance in poverty reduction and increased shared prosperity has been complemented by the systematic expansion of the middle class by 20 percentage points. This paper analyzes the main drivers of poverty reduction, shared prosperity, and changes in inequality in Turkey from 2002 to 2011. The analysis shows that labor markets, demographics, pensions, and social assistance have played a critical role in this process. It further explores some of the mechanisms that have facilitated these changes.

This paper explores determinants of participation, intensity and the magnitude of the rural nonfarm economy (RNFE) in Tajikistan. Conducting analysis at the district level, in addition to traditional individual and household levels, helps to test the impact of institutional determinants of the RNFE invariant at the micro level. We have found that rural residents in Tajikistan are mostly pushed into nonfarm activities in areas with scarce land resources of poor quality. Moreover, market imperfections in the agricultural sector are also found to induce participation and intensity of the rural nonfarm activities. While nonfarm activities are found to be mostly driven by "push" factors, poor education and the access to infrastructure are found to be important barriers constraining the poor from participation in nonfarm activities.

This paper uses a unique representative household budget survey from the Asian Development Bank to analyze the impact of international migration and remittances on crop income of rural farmers in the Kyrgyz Republic. Unlike other studies we allow the impact of remittances to be different for farmers with different land size and test whether reduced labor availability is more relevant for permanent than for seasonal migrants. We find that losing family members has a significant negative effect on crop income, but only for permanent migrants. Remittances partially compensate for this, but their positive impact decreases with farm size.

This paper uses a representative household-budget survey from the Asian Development Bank to analyse the determinants of international labour migration, distinguishing between seasonal and permanent (long-term) moves and comparing them with determinants of rural local income-generating activities in the Kyrgyz Republic. It has been found that both permanent migration and local nonfarm-wages employment substitute agricultural activities and attract the most educated rural individuals. The difference is that the permanent migration option is unattainable for individuals from poor households with small land holdings. They tend to engage in local nonfarm activities, while those who are educated and have resources to finance the cost of migration choose to leave the country for long periods of time. In contrast to permanent migration, seasonal migration does not require the possession of either higher or vocational education, which can make it potentially less harmful for local development in terms of brain drain.

During the last two decades, CIS countries have received very significant amounts of technical assistance from international development organizations and bilateral donors. While this has played a positive and important role in the transformation of CIS societies, practically all stakeholders share the opinion that serious problems have accumulated in this area. This chapter intends to outline these problems, analyze their underlying reasons (including the changing environment for technical cooperation in the CIS) and the interaction of the interests of beneficiaries, donors and providers in the process of implementing technical cooperation projects. The analysis suggests that a good understanding, recognition and coordination of the interests of all TC stakeholders and a reduction in the information gap between the various participants in the technical cooperation process are necessary for improving the effectiveness of technical cooperation.

This paper uses two representative household budget surveys from the Kyrgyz Republic to analyze factors influencing participation and returns from different types of nonfarm activities in 2005 and 2006. Nonfarm activities are found to be most important for the poor, who are pushed out of agriculture due to limited and poor land resources. We also show that different nonfarm activities have different human capital requirements. Unlike other studies, we use the double hurdle model which allows us to demonstrate that a number of variables have different effects on participation and income from nonfarm activities. For example, residing in remote areas and lack of capital are found to stimulate participation in nonfarm activities, but decrease nonfarm income. Overall, the empirical analysis confirms the importance of rural nonfarm activities and indicates that equipping poor households to enable them to move towards better remunerative nonfarm activities should be a priority for Kyrgyz rural policy makers.

This paper addresses the issue of self-selection of individuals in international labour migration, non-agricultural and agricultural employment in Tajikistan and its link to earnings from these activities. Unlike most empirical studies, we could attribute selection bias on unobservable characteristics to the allocation of individuals to alternative employment sectors and analyse its impact on earnings abroad and at home. We have found positive selection in migration against local non-agricultural activities and positive selection in local non-agricultural activities against local agricultural activities. This indicates that the most capable individuals with regards to unobservable characteristics choose to migrate, while the somewhat less able choose non-agricultural activities, and individuals with the worst capabilities stay in poorly-paid agricultural activities. Controlling for self-selection, labour income returns to education of migrants and individuals in non-agricultural activities are slightly lower than those from Ordinary Least Squares (OLS).

Remittances play important role for the economy of Central Asian countries. This article uses a unique representative household budget survey from the Asian Development Bank to analyze the determinants of remittances for permanent and seasonal migrants from the Kyrgyz Republic. Empirical investigation using Tobit and OLS with instrumental variables reveals that both groups send remittances for different reasons. Altruism and insurance seem to drive remittances from seasonal migrants, while the positive relations between income, assets and remittances from permanent migrants may be a result of bequest, loan repayment and exchange motives.

The rural nonfarm economy is very important for sustainable poverty reduction in Central Asia, which faces high population pressure, constrained land resources, unfinished agricultural reforms and uncertain migration prospects. This paper uses two representative household budget surveys from the Kyrgyz Republic to analyze factors influencing participation and returns from different types of nonfarm activities in 2005 and 2006. Nonfarm activities were found to be most important for the poor, who are pushed out of agriculture due to limited and poor land resources. Education, access to infrastructure, and cattle ownership are found to increase nonfarm returns. This suggests that equipping poor households to move towards better remunerative nonfarm activities should be a priority.

This paper uses a unique representative household budget survey from the Asian Development Bank to analyze the determinants of permanent and seasonal migration in rural areas of the Kyrgyz Republic and compare them with determinants of other local income generating activities. We have found that both permanent migration and local wage nonfarm employment substitute agricultural activities and compete for the most educated rural individuals. The difference is that permanent migration option is unattainable for individuals from poor households with small size of land and they engage in local nonfarm activities, while those who are educated and have resources to finance cost of migration choose to leave permanently the country. Finally, brain drain effect seems to be relevant only for permanent, but not for seasonal migration which does not require possession neither of higher nor vocational education

This article provides an in-depth regional analysis of the rural nonfarm economy in Kyrgyzstan based on three household budget surveys for 2003, 2005 and 2006. Regression analysis reveals that the share of time spent in the commercial rural nonfarm economy was larger in districts with low agricultural potential, indicating that the rural poor are pushed into accessible but not necessarily very profitable nonfarm activities. This ‘push’ scenario is probably strengthened by the low commercialisation and unfinished institutional reforms in the agricultural sector. Only in a few land-rich districts and in a district with a famous resort was labour ‘pulled’ into a profitable rural nonfarm economy stimulated by agricultural development and other local ‘motors’ of growth.

During the last two decades the CIS countries have received very significant amounts of technical assistance from international development organizations and bilateral donors. While this has played a positive and important role in the transformation of these societies, practically all stakeholders currently share the opinion that many problems have accumulated in the area of technical cooperation with CIS countries. This paper intends to outline these problems, analyze their underlying reasons - including the changing environment for technical cooperation in the CIS - and the interaction of the interests of beneficiaries, donors and providers in the process of implementing technical cooperation projects. The analysis suggests that a good understanding, recognition and coordination of the interests of all TC stakeholders and a reduction in the information gap between the various participants in the technical cooperation process are necessary for improving the effectiveness of technical cooperation.

This paper analyzes the direct and indirect income effects of international labor migration and remittances in selected CIS countries. The analysis is based on computable general equilibrium (CGE) models for Moldova, Ukraine, Georgia, Kyrgyzstan, and Russia. All net emigration countries would experience a sharp contraction of private consumption in the absence of remittances. In Russia, the main effect of immigration has been to hold down the real wage (as potential capital stock adjustments in response to immigration are not reflected in our comparative-static modeling framework). The paper concludes that because of the important contribution of migration and remittances to stabilizing and sustaining incomes in many CIS countries, enhanced opportunities for legal labor migration should figure prominently in any deepening of bilateral relations between CIS countries and the European Union under the European Neighborhood Policy.

This paper analyzes the direct and indirect income effects of international labor migration and remittances in selected CIS countries. The analysis is based on computable general equilibrium (CGE) models for Moldova, Ukraine, Georgia, Kyrgyzstan, and Russia. All net emigration countries would experience a sharp contraction of private consumption in the absence of remittances. In Russia, the main effect of immigration has been to hold down the real wage (as potential capital stock adjustments in response to immigration are not reflected in our comparative-static modeling framework). The paper concludes that because of the important contribution of migration and remittances to stabilizing and sustaining incomes in many CIS countries, enhanced opportunities for legal labor migration should figure prominently in any deepening of bilateral relations between CIS countries and the European Union under the European Neighborhood Policy.

Current report aims to identify major existing gaps in the five socio-economic dimensions (economic, human, openness, environmental, and institutional) and to reveal those gaps which could potentially hinder social and economic integration of neighbor states with the EU. To achieve this, the authors aim to assess the existing trends in the size of the gaps across countries and problem areas, taking into consideration the specific origin of the gap between EU15/EU12, on the one hand, and FSU republics, EU candidates and West Balkan countries, on the other hand. The paper is structured as follows: 1. A review of literature on the determinants of growth and development and the analysis of the catching up process between countries or groups of countries. 2. An analysis of the historic roots and origins of the development gap, and its evolvement over time. 3. A review of literature sources, draft analysis of primary statistical data, and qualitative explanations of gaps and divergences in selected development issues across the following socio-economic dimensions: level of economic development and convergence rates based on Real GDP (application of methodology testing ß and ? convergence to the set of countries analyzed); • quality of life and its components (poverty, inequality, health status and health care, access to fresh water and sanitation facilities, subjective perceptions of well-being); • human capital and labor market development, including level of education and public spending on education, its accessibility and quality, main differences in labor market development (employment participation rates and levels of unemployment, new jobs creation and labor protection legislation); • innovation potential, including R&D, information and communication technologies, and institutional environment; • openness and trade potential, including trade in goods and services, FDI stocks, trade regime and performance in logistics and infrastructure; THE DEVELOPMENT GAP BETWEEN THE CIS AND EU 15 CASE Network Reports No. 81 • environmental performance in terms of environmental stresses, efforts aimed at their reduction, and institutional capacity; • business climate, political institutions, and other institutional indicators (econometric analysis). 4. A test econometric analysis of development gaps across selected dimensions by using a Principal Components Method (PCM). The results are further presented in the form of ranks of countries analyzed reflecting their distances from EU15 in respective aggregate averages. Special attention is paid to gender-related development issues. Respective issues in human capital and labor market study, as well as variables included into PCM analysis were supplemented with relative gender data. Several conclusions finalize the report.