Studies on Poverty in Mongolia

Abstract: This thesis considers various aspects of the poverty in Mongolia, including estimations of the actual as well as future-looking poverty, its distributional and growth components, and selected policy impacts on poverty. Chapter two analyzes the inter-relationship between poverty, growth, and inequality in Mongolia, using Living Standard Measurement Survey (LSMS) for 1998 and 2002. The results show that education, employment, access to social and physical infrastructure, financial markets, and geographical location determine the households? likelihood of being poor. There is no significant difference between the determinants of poverty in urban and rural areas, however. Furthermore, the poverty decomposition exercises reveal that increasing inequality played a far more important role than income growth in the poverty increase between 1998 and 2002. Finally, the simulation results show that the growth in the service and agricultural sectors are able to reduce the overall poverty level to a larger extent than the industrial sector's expansion. Chapter three assesses household vulnerability to poverty as well as chronic and transient poverty in Mongolia. The estimation results, using Chaudhuri's method and LSMS 2002, show that vulnerability to poverty in Mongolia is about the same as the observed poverty rate, which is not the case, however, in most of the empirical case studies. It means that there is no significant high risk of poverty increase due to idiosyncratic shocks in the near future. Vulnerability and chronic poverty are mostly rural phenomena in Mongolia, while most of the transient poverty exists in the urban areas. The chronically poor households basically constitute the total poverty in Mongolia, implying that poverty reduction rather than preventive measures, more specifically, capability and capacity-enhancing policies, such as human capital investment and micro-credit programs, would reduce the total poverty in this country. Chapter four analyzes the effects of cashmere trade liberalization on the rural poverty in terms of transaction costs effects, using the LSMS 1998. The empirical studies in this chapter show that if a trade policy reform had been introduced in the cashmere sector, poverty would have been reduced. If the market participation of the cashmere producers had been increased, poverty would have been reduced even further. Moreover, they show that the variable transaction costs have an influence on the households? decisions on marketing raw cashmere, and that the fixed transaction costs may explain to some extent the marketing regime for the foods produced by them. However, there is no statistical evidence showing that the fixed transaction costs affect both marketing size and regime for the other non-food products. Finally, the estimation results show that the variable transaction costs are crucial both for market participation and the supply of raw cashmere for the poor-herders, but not for the non-poor ones.