Poverty, Growth and Income Distribution in Lebanon

This Country Study is based on a full national report that is the first to draw a profile of poverty in Lebanon based on money-metric poverty measurements of household expenditures. The report provides a comprehensive overview of the characteristics of the poor and estimates the extent of poverty and the degree of inequality in the country. It finds that nearly 28 per cent of the Lebanese population can be considered poor and eight per cent can be considered extremely poor. However, the most important finding of the report is that regional disparities are striking. For example, whereas poverty rates are insignificant in the capitol, Beirut, they are very high in the Northern city of Akkar. In general, the North governorate has been lagging behind the rest of the country and thus its poverty rate has become high. Levels of poverty are above-average in the South but are not as severe as expected. There are three other major results that have notable implications for a poverty-reduction programmed in Lebanon.

First, with few exceptions, measures of human deprivation, such as that provided by an Unsatisfied Basic Needs methodology, are generally commensurate with those for money-metric measures based on household expenditures. Second, the projected cost of halving extreme poverty is very modest, namely, a mere fraction of the cost of the country’s large external debt obligations. However, such a cost would rise dramatically if inequality were to worsen (i.e., if future growth were anti-poor). Also, the cost of reducing overall poverty would be substantially higher. Third, the poor are heavily concentrated among the unemployed and among unskilled workers, with the latter concentrated in sectors such as agriculture and construction. This places a priority on a broad-based, inclusive pattern of economic growth that could stimulate employment in such sectors.

Based on such findings, the report concentrates on providing general policy recommendations on issues of directing public expenditures to poor households. One of its major recommendations is to concentrate on channeling resources to poor regions below the governorate level, such as to four?strata? Where two-thirds of the poor in Lebanon are concentrated. However, the report notes that macroeconomic policies, particularly fiscal policies, will have to be redesigned to mobilize the resources necessary to finance the increases in public expenditures on the social safety nets and public investment in social services that should be part of a major poverty-reduction programmed. Annual real consumption per capita is one percent lower than the annual nominal real consumption per capita income. Distribution Among Regions Differ:

Mean per capital consumption Highest in Beirut and lowest in north Lebanon.

The distribution of expenditures among the population is unequal. 20%
7% of all consumption Inequality is very high: Gini Coefficient 20%
43% of all consumption 0.37 for nominal consumption & 0.36 for real consumption

Poverty & Growth (years 1997-2007)
Near 80% of the Lebanese population live under the extreme poverty line (unable to meet their daily basic needs) And rest near 20% of the population live between the lower and the upper poverty line.

The poverty line in Lebanon based on household Composition: Estimating poverty line not accurate because of 3 issues:
1.Different consumption patterns & prices between regions
2.Different “basic needs” between household members”
3.Ignorance of “economy of scale” within household
This study use a methodology that attempts for these problems: take into consideration all these issues that prevent estimating poverty line accurately. Use raw data for 2004-2005 (cost-of-basic needs )

Use sample of each household and construct its own food poverty line. Food basket of min. requirements of calories for individuals (taking into consideration age, gender, activity level …) using tables from WHO

Food poverty lines were set at the cost of the required calories
1st quintile
2nd quintile represent different region
P1, poverty gap index: measure the gap between the average income of poor individual & the poverty line
1.5% / 2004-2005 P2, poverty severity index: measures inequality among the extremely poor
o.43% / 2004-2005 Considering overall poverty: 7.97% extremely poor, 20.59% poor, & 71.45% non-poor Per capita nominal expenditure relative to the mean per capita expenditure in 2004/2005 has witnessed an increase in most of regions except for Mount Lebanon and north. Conclusion: Beirut witnessed the highest growth rate. Nabatieh, Bekaa, and south governorates witnessed consumption higher than average while for Mount Lebanon and north witnessed insignificant growth in expenditures. Financing Requirements for Poverty Reduction

Full national report applies a simple macro-model to calculate the gross investment macro-model to calculate the gross investment requirements for having extreme poverty 2015. (Take into account 3 distribution scenarios, population growth & rate of depreciation). Poverty correlates

High rate of poor unemployed and who are employed poor are unskilled labors. One quarter of the poor women are unemployed. The unemployment is due to the very poor education. 45% of the poor has less than the elementary degree level. Poverty correlated with the school participation. Element of a poverty reduction strategy

Lebanon can reach the MDG target of halving the portion of people living in extreme poverty in 2015 through: 1- Inclusive and sustained growth: (expand public investment and encourage greater private investment as a mean to stimulate growth) 2- Expanding Educational Opportunities: make sure that the poor either was a man or a women to enroll to schools. 3-promoting more balanced regional development: focus on the less developing region in the country, in case on the north. 4- Focusing Resources on poor household: Concentrate on the poor people and give them benefits mainly benefits should be directed toward casual and unskilled workers. 5- Monitoring Outcomes: Improve quality and frequency of data collecting to capture the economical and social change of the country. Targeting

In this article it was concentrated on targeting public expenditure although there are many other type of targeting that will help in the improvement of the poverty in Lebanon. Direct targeting: identify poor household or individuals. Characteristic targeting: identify the poor according to his characteristic (way he live, what he eats…). Some rich people live as poor people which result in leakage. And also some poor people give the impression that they are rich which result in under-coverage. Two ways for direct targeting: broad targeting includes types of spending. Narrow targeting include categories of people Two types of narrow targeting: indicator targeting, self targeting.