Ukraine Poverty Assessment: Poverty and Inequality in a Growing Economy Chapter Summaries
Lead Author: Edmundo Murrugarra
December 2005
This Poverty Report aims to improve understanding of poverty in Ukraine and provide linkages between growth, evolution of economic sectors, and poverty. The report finds that despite faster poverty reduction in Ukraine than in some neighboring countries, there is an increasing poverty gap between rural and urban households, reflecting fast but unbalanced economic growth. The growth experience has not changed the rather stagnant level of employment, and underemployment has also increased, reflecting partly subsistence agriculture and precarious labor markets in some small towns. The government has played a critical role in reducing poverty by increasing substantially social insurance transfers, and now there is a window of opportunity to reform the safety net system in order to effectively target the poor.
1. Profile and Dynamics of Poverty and Inequality
A joint assessment of the poverty methodology by Ukraine experts and World Bank staff suggests that the Ukrainian Government's relative poverty measure, while useful for its simplicity, may not provide an accurate description of the dynamics of poverty. This joint team derived an alternative methodology that incorporates best practices on poverty estimation. In 2003, about 19 percent of the population lived below the new poverty line. This chapter analyzes what characterizes the poor and which factors contribute most to poverty.
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2. Growth, Employment and Regional Dynamics
Despite high growth in Ukraine over the past several years, employment remains stagnant. This chapter looks at the driving forces behind unemployment and underemployment, the nature of the labor market, and job dynamics to determine the linkages with poverty.
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3. Rural Poverty, Land Reform, and Productivity
Agriculture makes up a significant, though declining proportion of GDP, and agricultural and rural workers were heavily impacted by the strains of transition. Land reform, increased productivity, and a greater number of efficient private enterprises have lead to some improvements in wages and standards of living. However, the overall gains in productivity, coupled with shifts in rural employment, have produced little change in rural poverty.
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4. Public and Private Social Safety Nets
In Ukraine, there are a number of public safety net transfers that have recently been undergoing reforms. Social insurance interventions in the form of a broad and generous pension benefit provide a significant amount of income to the elderly. Additionally, households responded to the uncertainty during early transition by diversifying their labor resources through migration and hence increasingly benefiting from remittances. This chapter assesses the role of each of these mechanisms in the process of poverty reduction over the last few years.
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5. Ensuring a Sustainable Poverty Reduction Process
This chapter discusses two broader areas where improvements are needed to strengthen the long-term linkages between growth and poverty reduction, and to better inform policymakers about the impact of specific policies. The first is a set of policies to provide the poor with better economic opportunities to benefit from growth, and the second is to develop a better system of poverty monitoring in order to respond to the changing nature of poverty in the country.
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