August 8, 2005

Document of the World Bank and the State Institute of Statistics, Turkey

Report No. 29619-TU

TurkeyJoint Poverty Assessment Report(In Two Volumes) Volume I: Main Report

Human Development Sector Unit State Institute of StatisticsEurope and Central Asia Region Turkey

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Household Budget Survey Household Consumption and Income Survey Human Development Report Household International Labor Organization International Monetary Fund Joint Poverty Assessment Report Kilocalories per day Kilograms Labor Force Surveys Minimum Food Cost Ministry o f Health National Accounts Not Elsewhere Classified Nomenclature o f Statistical Territorial Units Organisation for Economic Cooperation and Development Poverty Assessment Per Equivalent Consumption Per Equivalent Income Poverty Gap Index Purchasing Power Parity Public Sector Borrowing Requirement Postal Telephone & Telegraph Real Effective Exchange Rate Social Services and Children Protection Organization, Sosyal Hizmetler ve Cocuk Esirgeme Kurumu Small and Medium Enterprises State-owned Enterprises Social Risk Mitigation Project Social Insurance Organization, Sosyal Sigortalar Kurumu Social Assistance and Solidarity Encouragement Fund, Sosyal Yardimlasma ve Dayanisma Tesvik Fonu Social Assistance and Solidarity Foundations, Sosyal Yardimlasma ve Dayanisma Vakiflar Trends in International Mathematics and Science Study Turkish Lira United Nations Development Programme US. Dollars United States Department o f Agriculture United Nations Educational, Scientific and Cultural Organization World Bank World Development Indicators World Health Organization

TURKEY JOINT POVERTY ASSESSMENT REPORT

Table o f Contents

PREFACE ACKNOWLEDGEMENTS EXECUTIVE SUMMARY ............................................................................................................. i

A . Data Comparability ............................................................................................................................. i B . Recent Economic Developments ........................................................................................................ ii C . Poverty Profile ................................................................................................................................... 111

D . Education ........................................................................................................................................... iv E . Health ................................................................................................................................................. vi F . Labor Market in Turkey ................................................................................................................... viii G . Social Protection in Turkey ............................................................................................................... ix

A . Real Income and Consumption o f Households Between 1994 and 2002 ............................. 1 B . Inequality in Consumption o f Households Between 1994 and 2002: HBS ........................................ 5 C . Poverty Lines: 1994 and 2002 Methodology ..................................................................................... 5 D . Poverty in 1994 and 2002: HBS ......................................................................................................... 7

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CHAPTER I: DATA COMPARABILITY, 1994-2002 ................................................................. 1

E . Using the 1994 HBS and 2002 HBS to Decompose Changes in Poverty ....................................... 10 F . Conclusions ....................................................................................................................................... 13

CHAPTER 11: MACROECONOMIC CONTEXT ...................................................................... 14 A . Macroeconomic Instability Has Helped Keep Growth Below Potential .......................................... 15 B . Fiscal Imbalance Has Been the Root o f Chronic Macroeconomic Instability in Turkey ................. 15 C . Turkey’s Exchange Rate-Based Disinflation Program ..................................................................... 16 D . Exchange Rate-Based Disinflation Programs A r e Vulnerable in a Globalized World .................... 17 E . The Government Responded Quickly to the 2001 Crisis ................................................................. 18 F . Turkey’s Crisis Response Program Incorporated the Experience o f Other Emerging Markets ....... 18 G . Strong Recovery Has Been Under Way Since Early 2002 ............................................................... 20 H . Macroeconomic Outcomes in 2003 Were Favorable ....................................................................... 21 I . Turkey Has Achieved Sizable Fiscal Adjustment ............................................................................. 21 J . Deterioration in External Balance Has Created Volatility in Domestic Financial Indicators ........... 22 K . Ongoing Structural Reforms Are Expected To Stimulate Growth ................................................... 23

CHAPTER 111: POVERTY PROFILE ......................................................................................... 24 A . Household Size and Composition .................................................................................................... 24 B . Household Head Characteristics ....................................................................................................... 29 C . Spatial Characteristics ...................................................................................................................... 31 D . Non-Income Aspects o f Poverty ...................................................................................................... 34 E . Inequality and Regional Differences ................................................................................................ 37 F . Multivariate Analysis ........................................................................................................................ 40

CHAPTER IV: EDUCATION ..................................................................................................... 43 A . The Context ...................................................................................................................................... 43 B . Public Spending on Education .......................................................................................................... 45 C . Traces o f Inefficient Resource Allocation in the Education Sector ................................................. 47 D . Distributional and Education-Quality Implications o f Public Policies on Education ...................... 50 E . Economic Growth and Labor Market Implications o f a Public Policy that Undervalues Education 62

CHAPTER V: HEALTH ............................................................................................................. 70

A . The Health Care System ................................................................................................................... 70 B . Health Insurance ............................................................................................................................... 72 C . Health Outcomes .............................................................................................................................. 74 D . Self-Reported Morbidity 75 E . Access To and Use o f Health Care ................................................................................................... 76 F . Health Care Expenditure ................................................................................................................... 84

CHAPTER VI: LABOR .............................................................................................................. 90

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A . Official Unemployment and Labor Force Participation Rates from the LFS ................................... 90 B . Unemployment and Inactivity .......................................................................................................... 92

. .................................................................................................................... C Quality o f Employment 94 D . Sector o f Employment ...................................................................................................................... 98

CHAPTER VII: SOCIAL PROTECTION ................................................................................ 100 A . Turkish Pension System ................................................................................................................. 100 B . Social Solidarity Fund .................................................................................................................... 107 C . Conditional Cash Transfers ............................................................................................................ 112 D . Local Initiatives .............................................................................................................................. 113

REFERENCES ........................................................................................................................... 200

Box VII.l. Parameters ofthe Current Pension System ........................................................................... 101

List of Figures

Figure I . 1 . Consumption Per Capita with Various Deflators. 1990 . 100 ................................................... 4 Figure 1.2. Price Indexes in Turkey. 1990.2002. Annual Percentage Changes ........................................... 4 Figure 1.3. Turkey: Poverty and GDP Growth ........................................................................................... 8

Figure 11.1. Per Capita GDP Compared to EU Average ............................................................................ 14 Figure 11.2. GDP and GDP Per Capita Growth Rates in Emerging Economies (1965-2001) ................... 14 Figure 11.3. Turkey: Volatility o f REER and GDP Growth, 1990-2000 .................................................. 15 Figure 11.4. Adjusted Public Sector Borrowing Requirement (% o f GNP) ............................................... 16 Figure 11.5. Total Net Public Debt (% o f GNP) ......................................................................................... 19

Figure 111.1. Turkey: Poverty and Household Size ................................................................................... 25 Figure 111.2. Turkey: Poverty and Number o f Children ............................................................................ 26 Figure 111.3. Turkey: Poverty and Number o f Elderly .............................................................................. 27 Figure 111.4. Turkey: Share o f Poor in Percent by Household Consumption ........................................... 28 Figure 111.5. Turkey: Poverty Rate and Age ............................................................................................. 29 Figure 111.6. Turkey: Poverty and Gender o f Head .................................................................................. 30 Figure 111.7. Turkey: Poverty and Education o f Household Head ............................................................ 30 Figure 111.8. Turkey: Poverty and Location .............................................................................................. 31 Figure 111.9. Turkey: Household Size and Location ................................................................................. 32 Figure 111.10. Rural Employment by Sector .............................................................................................. 33 Figure 111.11. Urban Employment by Sector ............................................................................................. 33 Figure 111.12. Rural Employment by Sector .............................................................................................. 34 Figure 111.13. Turkey: Poverty and Dwelling ........................................................................................... 35 Figure 111.14. Turkey: Poverty and Use o f Dung ..................................................................................... 35 Figure 111.15. Turkey: Poverty and Discretionary Activities .................................................................... 37 Figure 111.16. Turkey: Poverty and Shopping ........................................................................................... 37 Figure 111.17. Per Capita GDP Index ......................................................................................................... 41 Figure 111.18. Socioeconomic Development Levels (2003) ...................................................................... 41

Figure 1.4. Poverty Changes ...................................................................................................................... 10

Figure 11.6. GNP Growth ........................................................................................................................... 20

Figure 111.19. Female Literacy Rates (2000) ............................................................................................. 42 Figure IV.1. Public Spending on Education as Percentage o f Gross Domestic Product ........................... 45 Figure IV.2. Number o f Students by School Type .................................................................................... 48

Figure IV.4. Number o f Students Per Classroom by School Type ............................................................ 49 Figure IV.5. Student-Teacher Ratios in the 1997-1998 and 2002-2003 School Years ........................... 50 Figure IV.6. 1999 TIMSS Mathematics Achievement o f Eighth-Grade Students .................................... 57 Figure IV.7. 1999 TIMSS Science Achievement o f Eighth-Grade Students ............................................ 58 Figure IV.8. Problems with Schools, Public and Private .......................................................................... 59 Figure IV.9. Problems with Schools, Urban, and Rural ............................................................................ 60 Figure IV.10. Satisfaction with Quality o f Education ............................................................................... 61 Figure IV.11. Satisfaction with Quality o f Education ............................................................................... 61

Figure IV . 13 . Illiterate Unemployment Rates Over Time ......................................................................... 66 Figure IV.14. Literate Without Diploma Unemployment Rates Over Time ............................................. 66 Figure IV.15. Primary School Graduates’ Unemployment Rates Over Time ........................................... 67 Figure IV.16. Junior Secondary Graduates’ Unemployment Rates Over Time ........................................ 67

Figure IV.18. Secondary School Graduates’ Unemployment Rates Over Time ....................................... 68 Figure IV . 19 . Vocational Secondary School Graduates’ Unemployment Rates Over Time ..................... 69

Figure V.l. Share o f Population with Health Insurance, by Quintile ........................................................ 73

Figure V.3. Incidence o f Illness Income Quintiles and Location .............................................................. 75 Figure V.4. Incidence o f Morbidity by Health Insurance Status ............................................................... 76

Figure V.6. Propensity to Seek Treatment ................................................................................................ 77 Figure V.7. Propensity to Seek Care When Ill by Insurance Status .......................................................... 78

Figure V.10. Composition o f Public Sector Spending on Health, 2003 .................................................... 87 Figure V.11. Composition o f Total Health Sector Spending (2000) ......................................................... 88 Figure V.12. Destination o f Central Government Funding for Health Care ............................................. 89 Figure VI.1. Turkey: Unemployment Rate ............................................................................................... 91 Figure VI.2. Turkey: Labor Force Participation Rate ............................................................................... 91

Figure VI.5. Turkey: Poverty and Inactivity ............................................................................................ 94

Figure VI.7. Turkey: Poverty and Employment Status ............................................................................ 95

Figure VI.9. Turkey: Poverty and Type o f Workplace ............................................................................. 96 Figure VI.10. Turkey: Poverty and Size o f Fi rm ...................................................................................... 97 Figure VII.l. Budgetary Transfers to Social Security Institutions .......................................................... 105

Figure IV.3. Number o f Classrooms Over Time ....................................................................................... 48

Figure IV.12. Unemployment Rates Over Time ....................................................................................... 65

Figure IV.17. Vocational Junior Secondary Graduates’ Unemployment Rates Over Time ...................... 68

Figure IV.20. Higher Education Graduates’ Unemployment Rates Over Time ........................................ 69

Figure V.2. Regional Variation in Infant and Child Mortality Rate and Prenatal Care and Home Births 74

Figure V.5. Share o f Those Reporting I l lness Who Sought Care by Quintile and Location ..................... 77

Figure V.8. Hospitalization Among Those Requiring Hospitalization, by Quintile ................................. 79 Figure V.9. Evolution o f Public Sector Spending on Health ..................................................................... 87

Figure VI.3. Turkey: Adults Employed .................................................................................................... 92 Figure VI.4. Turkey: Adults Not Employed ............................................................................................. 92

Figure VI.6. Turkey: Poverty and Employment Situation ........................................................................ 94

Figure VI.8. Turkey: Poverty and Social Security ................................................................................... 96

List of Tables

Table 1.1. Macroeconomic and Household Survey-Based Data on Living Standards. 1994-2002 ............. 2

Table 1.3. Change in Main Indicators for Real Incomes and Consumption. 1994. 2002 ............................. 3 Table 1.2. Indexes for Deflating Nominal Values: 1994 and 2002. 1994 = 1.00 ......................................... 3

Table 1.4. Inequality .................................................................................................................................... 5

Table 1.5. Food Basket for Equivalent Adult ............................................................................................... 6 Table 1.6. Poverty Lines, 1994-2002 .......................................................................................................... 7 Table 1.7. Comparison o f Poverty in Turkey Between 1994 and 2002 ....................................................... 7

Table 1.9. Absolute Poverty Rates o f Europe and Central Asia .................................................................. 9

Table 111.1. Turkey: Poverty and Household Size .................................................................................... 24

Table 1.8. Comparable Poverty Incidence ................................................................................................... 8

Table I . 10 . Decomposition o f Poverty Change Between 1994 and 2002 .................................................. 12 Table 11.1. K e y Economic Indicators ......................................................................................................... 19

Table III.2. Turkey: Poverty and Number o f Children in Household ...................................................... 25 Table 111.3. Turkey: Age Structure o f H B S and Census ........................................................................... 26 Table 111.4. Turkey: Poverty and Number o f Elderly ............................................................................... 27 Table 111.5. Turkey: Poverty and Household Composition ...................................................................... 28 Table 111.6. Turkey: Poverty Rate of Age ................................................................................................. 28

Table 111.8. Comparable Inequality ........................................................................................................... 38 Table 111.9. N e w Methodology Inequality Measures ................................................................................. 38 Table 111.10. Per Capita Gross Domestic Product, by Statistical Regions, 2001 ....................................... 39 Table 111.11. Turkey: Social and Human Development Indicators 1997 ................................................. 40 Table 111.12. Probit Estimates .................................................................................................................... 40 Table IV.1. Number o f Schools, Students, and Teachers in the 2001-2002 School Year ........................ 44

Table IV.3, Incidence o f Household Expenditures on Education in 1994 and in 200 1 ............................. 47 Table IV.4. Characteristics o f Children Aged 6 to 14, by Primary School Attendance Status ................. 51 Table IV.5. Primary School Attendance by Parental Schooling ............................................................... 52 Table IV.6. Estimated Distance Conditional o n School Availabil ity in the Residential Area .................. 53 Table IV.7. Predictors o f Continued Education after Completion o f 8-Year Primary School .................. 54 Table IV.8. Conditional on School Availabil ity in the Residential Area .................................................. 56 Table IV.9. Problems with School ............................................................................................................ 60 Table IV . 10 . Satisfaction with Quality o f Education ................................................................................ 62 Table N.11. Ordinary Least Squares Estimates o f Log-Hourly-Earnings ................................................ 64 Table V.1, Distribution o f Primary Care Health Staff, by Region, 2002 .................................................. 71 Table V.2. MOH Health Centers and Health Posts Lacking K e y Staff, by Region, 2002 ........................ 71 Table V.3. Regional Distribution o f Hospital Beds, 2002 ......................................................................... 72

Table 111.7. Turkey: Poverty Rate o f Consumer Durables ........................................................................ 36

Table IV.2. Incidence o f Public Spending o n Education in 1994 and in 2001 .......................................... 46

Table V.4. Health Insurance Coverage and Poverty .................................................................................. 73 Table V.5. Health Status Comparisons ...................................................................................................... 74 Table V.6. Vaccination Coverage o f Infants and Pregnant Women (TT-2T), by Region, 1998-2002 ..... 75 Table V.7. Self-Reported Morb id i ty by Income Quintile .......................................................................... 76 Table V.8. Health Care Util ization by Severity o f Illness ......................................................................... 78

Table V.10. Reasons for N o t Being Hospitalized When Needed .............................................................. 80 Table V.11. Problems Encountered When Seeking Outpatient Care, by Quintile .................................... 80 Table V.12. Average Amount Paid During Last Outpatient Treatment by Those Who Paid .................... 81 Table V.13. Share and Average Amount of Payments for Last Hospital Admission ................................ 81 Table V . 14 . Determinants o f Health Care-Seelung Behavior, Probit Estimates ....................................... 81 Table V.15. Location o f Outpatient Care by Quintile ............................................................................... 83

Table V . 17 . Util ization o f Preventive Care ............................................................................................... 84 Table V.18. Composition o f Health Care Expenditure, by Expenditure Quintiles ................................... 84 Table V.19. Proportion o f People with Catastrophic Health Care Expenditure ........................................ 85 Table V.20. Impoverishing Effects o f Health Care Expenditures ............................................................. 86 Table V.21. Distribution o f Public Sector Spending on Health Across Income Quintiles ........................ 88

Table V.9. Reasons for N o t Seeking Outpatient Care When I11 ................................................................ 79

Table V . 16 . Average Amount Paid for Outpatient Treatment by Facil ity Type ....................................... 83

Table V I . 1 . Turkey: Unemployment Rate and Labor Force Participation Rate ....................................... 90 Table VI.2. Turkey: Poverty Rate o f Reason for Not Seeking Job .......................................................... 93 Table VI.3. Turkey: Poverty Rate o f Status o f Workplace ....................................................................... 97 Table VI.4. Turkey: Poverty Rate o f Legal Status o f Workplace ............................................................ 98 Table VI.5. Turkey: Poverty Rate o f Basic Code o f Main Activity o f Workplace .................................. 99

Table VII.2. Types o f SYDTF Assistance, July 1, 1997-March 26. 1999 .............................................. 108 Table VII.3. SYDTF Employment-Generating Project Assistance, July 1, 1997-March 26, 1999 ......... 109

Table VII.1. Contribution Rates to SSK .................................................................................................. 102

Table VII.4. SYDTF Revenues ............................................................................................................... 110 Table VIIS . SYDTF Expenditures .......................................................................................................... 110 Table VII.6. Quarterly Figures for CCT .................................................................................................. 113 Table VII.7. Turkey: Incidence ofNomina1 Transfers ........................................................................... 114

List of Annexes

ANNEX I: METHODOLOGY ................................................................................................................ 115 ANNEX 11: POVERTY IN TURKEY: A LITERATURE REVIEW ..................................................... 185

List of Annex Figures

Figure A.I.l. Cumulative Distribution o f PEC ........................................................................................ 123

List of Annex Tables

Table A.I. 1 . Household Size by the Type o f Settlement ......................................................................... 119 Table A.I.2. The Structure o f Cash Income ............................................................................................. 120 Table A.I.3. The Structure o f Consumption ............................................................................................ 121 Table A.I.4. Average Monthly Consumption by Deciles ........................................................................ 122 Table A . 1.5. Inequality Measures ............................................................................................................ 124 Table A.I.6. The Structure o f a Minimum Food Basket Estimated Based on Survey Data .................... 125 Table A.I.7. Average Value o f Monthly, Complete Poverty Line, by Household Size .......................... 126

Table A.I.9. Sensitivity o f Poverty Statistics to CPI and Housing Imputed Rent ................................... 128 Table A.I.lO. Food Consumption and Expenditures, 1994 and 2002 ...................................................... 129 Table A.I.ll. Comparable Poverty Measures, 1994 and 2002 ................................................................ 130 Table A.I.12. Food Basket for Equivalent Adult ..................................................................................... 130 Table A.II.1. Different Poverty Measures and Results ............................................................................ 186 Table A.II.2. Poverty by Region ............................................................................................................. 186 Table A.II.3. Urban and Rural Poverty Rates .......................................................................................... 187 Table A.II.4. Calorie Requirements by Age and Gender ........................................................................ 187 Table A.II.5. Structure o f Poverty by Age and Gender (Food Poverty) .................................................. 188 Table A.II.6. Structure of Poverty by Age and Gender (Basic Needs) ................................................... 189 Table A.II.7. Structure of Poverty by Employment Status (Food Poverty) ............................................ 189 Table A.II.8. Structure of Poverty by Employment Status (Basic Needs) .............................................. 190

Table A.I.8. Poverty Headcount, Gap, and Severity Index ..................................................................... 127

Table A.II.9. Structure of Poverty by Economic Activity (Food Poverty) .............................................. 190 Table A.II.10. Structure o f Poverty by Economic Activity (Basic Needs) ............................................. 191

Table A.11. 13 . Poverty and Agricultural Activity o f the Household ...................................................... 192 Table A.II.14. Poverty and Agricultural Land Size ................................................................................. 193 Table A.II.15. Poverty and Agricultural Land Size Across Regions ....................................................... 194

Table A.II.l 1 . Regional Poverty .............................................................................................................. 191 Table A.II.12. Poverty and Gender o f Household Head ......................................................................... 192

Table A.II.16. Poverty and Number o f Tractors Owned ......................................................................... 194 Table A.II.17. Structure o f Poverty According to Number o f Tractors Owned ...................................... 195 Table A.II.18. Poverty Line Per Capita (Annual) .................................................................................... 195 Table A.II.19. Comparison o f Income and Poverty Lines by 5 Percent o f Population ........................... 195 Table A.II.20. Poverty in Turkey, 1987-1994 (Minimum-Food-Cost Approach ................................... 196 Table A.II.21. Poverty in Turkey, 1987-1994, (Cost-of-Basic-Needs Approach) .................................. 197

List of Appendices

Appendix 1: Income and Consumption by Poverty Status and UrbadRural Dimention ........................ 132 Appendix 2: Poverty Figures for Various Poverty Lines ........................................................................ 142 Appendix 3: Sensitivity o f Poverty ......................................................................................................... 157 Appendix 4: Regression Analysis ........................................................................................................... 161 Appendix 5: Food Basket ........................................................................................................................ 165 Appendix 6: Estimation o f Average Household Adult Equivalent Size .................................................. 171 Appendix 7: General Descriptive Statistics ............................................................................................. 175

This volume i s a product o f the staff o f the State Institute o f Statistics. Turkey and the International Bank for Reconstruction and Development/The World Bank . The findings. interpretations. and conclusions expressed in this paper do not necessarily reflect the views o f the Executive Directors o f the World Bank, or the govemments they represent .

The State Institute of Statistics and the World Bank do not guarantee the accuracy of the data included in this work . The boundaries. colors. denominations. and other information shown on any map in this paper do not imply any judgment on the part of the State Institute o f Statistics and the World Bank concerning the legal status o f any territoty or the endorsement or acceptance o f such boundaries .

PREFACE

This report represents the f i rs t time that the State Institute o f Statistics (DIE) o f Turkey and the World Bank have issued a joint report on poverty in Turkey. The findings o f the Volume One Report have been subject to thorough technical review by both institutions, and are considered to be joint findings. While this report presents a comprehensive analysis of poverty in Turkey, considerable research into the subject has already been done by the World Bank (World Bank 2000,2003), the Turkish Government (2003), the United Nations Development Programme (UNDP 2001), and academicians and scholars (see Annex I1 for a review o f the literature). Under the institutional development component o f the Social Risk Mitigation Project (SRMP), the World Bank has delivered technical assistance to DIE on poverty measurement and analysis, leading to this report.

The basic data used in this report are from the official 2002 Household Budget Survey (HBS), conducted by DIE. Comparisons over time are made to the 1987 and 1994 official DIE HBS surveys. Additional qualitative information was gathered from a variety o f primary and secondary sources. Limited quantitative data from an unofficial survey o f 2001 (which was not conducted by DIE) are used as secondary sources in some o f the chapters. Administrative data from other Turkish Government agencies are also used.

The 2002 HBS sample was designed to be representative o f the population o f Turkey, and to provide reliable information needed for an urban-rural breakdown o f data. I t was not designed to be regionally representative. Thus, only qualitative data and secondary-source data are used herein to discuss the regional dimensions o f poverty in Turkey. The World Bank and DIE anticipate a further joint report on regional aspects o f poverty in Turkey, based on data from the 2003 HBS, which has a larger and regionally representative sample.

This report sets out a new poverty line’ methodology for Turkey as the basic measure o f poverty in the country. However, several poverty lines are calculated for the purpose o f international comparability, and comparability to the World Bank’s poverty measures using the 1987 and 1994 data. The basic findings for Turkey for 2002 were published in a press release by DIE (April 13, 2004), and this report provides the underlying analysis and methodology for these figures.

In 2002, 27 percent o f the Turkish population was poor, based on the new poverty line methodology detailed in Annex One (food and non-food consumption). However, very few (nearly zero) consumed under the food l ine or under the $1 per person per day l ine used in international comparisons (Table A.I.8). The analysis in this report refers generally to the new poverty line methodology that results in 27 percent poor. This l ine i s called “complete” poverty line, and i s referred to as “Total poverty” in statistical tables. Additional poverty lines and rates can be found in Annex One.

This volume begins with a comparison of poverty trends from 1994 to 2002 (Chapter One), reviews macroeconomic developments and poverty in Chapter Two, draws a portrait or profile o f the poor in Chapter Three, and considers education (Chapter Four), health (Chapter Five), labor (Chapter Six) and Social Protection (Chapter Seven).

’ The poverty line i s the minimum amount o f consumption needed for an individual or household to cover i ts basic needs for food and non-food goods.

ACKNOWLEDGEMENTS

This task was managed by Jeanine Braithwaite (ECSHD) for the Wor ld Bank and by Ozlem Sarica for State Institute o f Statistics (DIE). The f i rst volume i s a jo int report o f the Wor ld Bank and DIE. The second volume i s a Wor ld Bank report.

The team i s grateful for the support of Andrew Vorkink, Country Director, Wor ld Bank, and Omer Demir, President, DIE. The team benefited f rom comments o f peer reviewers Jeni Klugman (AFTP2), Peter Lanjouw (DECRG), and Edmundo Murmgara (ECSHD).

Volume One: Managed by Jeanine Braithwaite and Ozlem Sarica. The Wor ld Bank team included: Ruslan Yemtsov, Ismail Arslan, Kamer Ozdemir (ECSPE), Cem Mete, Monika Huppi, Anita Schwarz (ECSHD) and Ahu Gemici (Consultant). The DIE team included Sema Alici, Zuhal Daskiran, Guzin Erdogan, Muzzeyyen Pamuk, Gullu Calik, Murat Karakas and Enver Tasti, and Sasun Tsirunyan (Consultant). Special thanks to Carmen Laurente, Jennifer Manghinang, Gizella Diaz and Selma Karaman (ECSHD) for document finalization and logistics and to Shruti Kapoor (Consultant) for research assistance.

Volume Two: Managed by Jeanine Braithwaite (ECSHD) with contributions o f the Wor ld Bank team members noted above and the ECSPE team working in Turkey.

Bo th volumes were edited by Diane Stamm (Consultant).

EXECUTIVE SUMMARY

The basic data used in Volume One are from the official 2002 Household Budget Survey (HBS), conducted by DIE. Comparisons over time are made to the 1987 and 1994 official DIE HBS surveys. Additional qualitative information was gathered from a variety o f primary and secondary sources. Limited quantitative data from an unofficial survey o f 2001 are used as secondary sources in some o f the chapters. Administrative data from other Turkish Government agencies are also used.

The 2002 HBS sample was designed to be representative o f the population o f Turkey, and to provide reliable information needed for an urban-rural breakdown o f data. I t was not designed to be regionally representative. Thus, only qualitative data and secondary source data are used herein to discuss the regional dimensions o f poverty in Turkey. The World Bank and DIE anticipate a further joint report on regional aspects o f poverty in Turkey, based on data from the 2003 HBS, which has a larger and regionally representative sample.

This report sets out a new poverty line methodology for Turkey as the basic measure o f poverty in the country. However, several poverty l ines are calculated for the purpose o f international comparability, and comparability to the World Bank’s poverty measures using the 1987 and 1994 data. The basic findings for Turkey for 2002 were published in a press release by DIE (April 13, 2004), and this report provides the underlying analysis and methodology for these figures.

2

In 2002, 27 percent o f the Turlush population was poor, based on the new poverty line methodology detailed in Annex One (food and non-food consumption). However, very few (nearly zero) consumed under the food l ine or under the $1 per person per day line used in international comparisons (Table A.I.8 found in Volume One). The analysis in this report refers generally to the new poverty l ine methodology that results in 27 percent poor. This l ine i s called “complete” poverty line, and i s referred to as “Total poverty” in statistical tables. Additional poverty l ines and rates can be found in Annex One o f Volume One.

A. DATA COMPARABILITY

An in-depth analysis o f the 2002 Household Budget Survey (HBS) compared to that from 1994 shows that living standards in Turkey remained almost unchanged. Poverty based on the previous methodology declined gradually from 1987 to 2002, from 38.5 percent to 34.5 percent. Poverty based on the updated methodology3 declined from 28.3 percent to 27 percent from 1994 to 2002. On the other hand, inequality marginally increased. Extreme poverty, already low, further declined from 1994 to 2002. Food poverty declined from 2.9 to 1.4 percent, while $1 per person per day poverty, depending on purchasing power parity (PPP) used, was 2-3 percent or even negligible (0.2 percent).

A poverty-growth decomposition demonstrated that while economic growth was a main driving force in poverty reduction, much o f the gains from growth were offset by inequality, which slightly worsened from 1994 to 2002. These conclusions should be treated with caution in that both 1994 and 2002 were either crisis years, or immediately following crises, and so there was no measurement o f the effect o f

The poverty l ine i s the minimum amount o f consumption needed for an individual or household to cover i t s basic needs for food and non-food goods.

This i s the updated poverty line for 1994, but the consumption aggregate for 1994 i s the old version. For 2002, both the consumption aggregate and the poverty line were the new methodology. Additional details are found in Chapter One (Data Comparisons) and Annex One (Methodology) o f Volume One.

sustained growth on poverty. DIE is now conducting surveys to measure poverty annually, so the measurement problem should abate in the future.

B. RECENT ECONOMIC DEVELOPMENTS

Despite many advantages ranging fkom i t s strategic location to its dynamic population, Turkey has not achieved the stable high growth o f leading emerging market economies. On average, the Turlush economy grew slightly under 3 percent per year over the past decade, wel l below the best-performing emerging economies.

Turkey has suffered from an exceptional degree of macroeconomic instability characterized by high inflation and sharp swings in business cycles. Inflation was higher and growth lower in the 1990s than in the 1980s. In this period, unsustainable fiscal policy has repeatedly put pressure on the Turkish L i ra (TL), fueled inflation, and undermined financial stability. Open capital accounts and a poorly regulated banking system have magnified the impact o f unsustainable fiscal pol icy on macroeconomic stability. Short-term capital f lows have fluctuated widely as investors responded to the boom-bust cycle driven by unstable conditions.

In 2000, a crawling peg exchange rate regime was launched to rid the economy o f inflation. K e y structural reforms in social security, infkastructure, agriculture, privatization, and banking were introduced. However, these achievements were insufficient to avoid a crisis, given the extent o f Turkey’s underlying fiscal and financial sector weaknesses built up over decades o f instability and delayed reform.

By 200 1, persistent doubts about the peg, and underlying fiscal instability, led to a full-blown speculative attack against the currency. Interest rates shot up to several thousand percent, forcing the Government to abandon the crawling peg and float the TL. The TL immediately lost 40 percent o f i ts value in a single day.

In response to the crisis, following the collapse o f the crawling peg and subsequent devaluation, the Government announced a strengthened economic program in M a y 2001. The key structural and social elements o f the program were: (a) a macroeconomic fkamework designed to restore financial stability and ensure public debt sustainability; (b) a rapid restructuring o f the banking sector; (c) a public sector reform program; (d) renewed privatization; and (e) enhanced social assistance.

The Turkish economy started to grow at a fast pace in 2002. Economic growth reached 5.9 percent in 2003, following 7.9 percent growth in 2002. Whi le the inventory build-up led the recovery in 2002, private consumption and investment was behind the strong growth performance in 2003. The current account deficit widened to almost 3 percent o f GNP in 2003, but was easily financed by short-term capital inflows, public sector borrowing abroad and reverse currency substitution. Inflation fe l l t o 18.4 percent in 2003, and the latest data suggest that in mid-2004, inflation declined to the important single digit level for the f irst time since the 1970s. Aggregate unemployment remained stable at around 10 percent but this was helped by a temporary shrinkage in the labor force. Fiscal gains were significant in 2003, and the primary surplus rose from 4 percent o f gross national product (GNP) in 2002 to over 6 percent o f GNP in 2003, close to the programmed 6.5 percent target. Monetary pol icy fo l lowed a pol icy o f impl ic i t inflation targeting, with the Central Bank o f Turkey (CBT) occasionally intervening in the foreign exchange market to dampen what was deemed to be excessive fluctuation in the exchange rate. The decline in inflation, which was aided by the strength o f the TL, led to a commensurate decline in interest rates from a nominal 60 percent in the f i rs t quarter o f 2003, to about 25 percent early in 2004.

.. 11

However, the deterioration in global financial indicators in early M a y 2004 combined with the higher than expected current account deficit figures have led to a sharp weakening in domestic financial indicators. The excess volat i l i ty in the foreign exchange market was curbed to some extent by the Central Bank’s intervention. It appears that some relative stability has been achieved in domestic financial markets. These recent deteriorations have underlined Turkey’s exposure to shocks f rom the extemal environment. Whi le the depreciation o f the TL i s an adjusting factor to the deteriorating current account balance, i t i s also l ike ly to affect inflationary expectations and domestic interest rates. Higher domestic interest rates, in tum, together with the impact o f the TL’s depreciation, would influence the overall fiscal deficit and economic activity. The spillover f rom global liquidity tightening and rising spreads are l ike ly to increase the cost o f extemal borrowing. Such developments, if persistent, could disrupt the virtuous cycle that the economy has experienced over the last year and a half.

C. POVERTY PROFILE

Household Size and Composition. Poverty in Turkey i s strongly associated with age and household composition; children and families with children are poorer than average. Poverty increases monotonically with additional household members, starting at three members. Larger households are poorer than smaller households, and this i s primarily due to the fact that the additional household members are more l ikely to be children, who have a higher poverty rate. Households with no children or only one chi ld had poverty rates below the average. There i s also a correlation between having elderly members and household poverty, though this correlation i s not as marked as with having additional children. Having one more elderly member did not appreciably increase the r isk o f poverty, and having two or more slightly elevated the risk. With respect to correlation with age, younger children are poorer, active-aged adults are not as poor on average, and the elderly are poorer than adults, but not as poor as children .

Household Head Characteristics. The household head has a substantial impact o n the poverty status of h is or her household, through the employmenb‘inactivity nexus and the amount o f income she or he can contribute to the household. The poverty rate for households with unemployed heads i s 35.4 percent, compared to 27 percent for the total sample. Besides this, other demographic features that are associated with poverty include whether the household head i s a female or not (32 percent poor versus 26.6 percent poor for female and male heads respectively), and the education o f the household head. Illiterate heads and those who had not completed primary school heads had poverty rates nearly twice the average, whi le those few with masters or other advanced degrees had a poverty rate o f zero.

Spatial Characteristics. There i s a sharp difference in the poverty rates between rural and urban households; the poverty rate i s nearly 35 percent for the rural population, but only 22 percent for the urban population. The factors for high rural poverty are the same as for poverty overall.

Rural areas are characterized by limited employment opportunities, and rural households where the head i s unemployed face a substantial risk o f poverty. Other kinds o f inactivity have different implications on rural and urban areas. The major driver for rural and urban employment findings appears to be sector of employment, where rural location i s dominated by agriculture, which offers less lucrative options compared to formal employment found in urban areas.

Education has identical effects on both rural and urban areas, whereby those who are illiterate or whose education i s l imited to primary school have higher poverty rates than average, and graduates o f higher education are much less l ikely to be poor. In both areas, poverty rates steadily decrease as years of education increase.

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Non-Income Aspects of Poverty. Poverty restricts the poor f iom accessing many goods and services. Non-income here refers to material items, assets, or services that are ultimately obtained through income. In Turkey, there i s a marked difference in the kind o f dwelling. About half the sample population lives in a house, and another 27 percent lives in apartments. While individual houses are primarily in rural areas, apartments are almost exclusively an urban phenomenon. Only 6.5 percent o f the apartment dwellers are poor, while 36 percent o f those who live in houses are poor.

In terms o f land ownership, 27 percent o f the sample population reported they had a field, but these households were poorer than average. The mean size o f the fields for poor households was 75 percent o f the non-poor fields. More than one-fifth o f the population possessed a car, but only 6 percent o f these were poor.

The poor are less able to afford discretionary expenditures. The poverty rate o f those who smoke, drink, take computer courses, and have access to public transportation to school, for example, i s lower for all than the overall poverty rate o f 27 percent poor. Shopping patterns also vary between poor and non-poor; the latter are more likely to shop at markets or bazaars.

Inequality and Regional Dzferences. Turkey i s a middle-income country, and i t s inequality i s high. Both consumption and income indexes indicate that inequality i s higher in urban areas than in rural areas, but not much. Other data confirm overwhelmingly that there i s a sharp East-West divide in Turkey where the Southeastern and Eastem Anatolia regions are much poorer and have sharply lower human development indicators than Westem Turkey.

D. EDUCATION

In 1923, the year in which the Republic o f Turkey was founded, the adult literacy rate was approximately 10 percent. Such a low starting point (not uncommon for that era) gave the Republic a major cause to introduce a series o f ambitious reforms that included a move toward secular education and the adaptation of the Latin alphabet. Wh i le the schooling environment in Turkey gradually improved over time, the 1997-1 998 school year marked another major leap forward in that compulsory schooling increased from 5 years to 8 years for children aged 6 to 14. Enrollment rates increased soon after this reform, not only for the %year basic education cycle but also for secondary education.

Public Spending on Education

Turkey’s public spending on education increased significantly after 1998, both in real terms and as a percentage o f gross domestic product (GDP). Consequently, as o f 2000, Turkey’s public spending on education as a percentage o f GDP has become comparable to the spending patterns observed in countries of similar levels o f economic development. The expansion o f compulsory schooling to 8 years had an extremely positive impact on the distribution o f public spending on education across r i ch and poor households. In 2001, 21.7 percent o f public spending on basic education reached the poorest 20 percent of households (as opposed to 15.8 percent in 1994). But there i s significant room for improvement when i t comes to secondary education, since only 13 percent o f public spending reached the poorest 20 percent of the population in 200 1. Household expenditures on education strongly reinforce the disadvantageous situation o f poor children: in 2002, the wealthiest 20 percent o f households spent 6.4 times more on education than did the poorest 20 percent o f households. The current situation represents a significant improvement compared to 1994, when the wealthiest households spent 28.8 times more on education than did the poorest households.

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Inefficient Resource Allocation in the Education Sector

After the expansion o f compulsory schooling, the number o f primary school students and students enrolled in general secondary schools has significantly increased. The number o f students enrolled in vocational secondary schools has remained roughly the same.

Classroom construction at the basic education level has been impressive: students per classroom at this level declined between the 1997-1998 school year and 2002-2003 school year despite increasing enrollments. At the secondary level, however: (i) the number o f vocational school classrooms increased significantly in 2002-2003 (reflecting previous investments) even though enrollment in vocational schools did not increase in recent years; and (ii) the number o f general secondary classrooms remained stagnant, even though general secondary school enrollment increased visibly in recent years. As a result, as o f the 2002-2003 school year, average classroom size was 18 in vocational secondary schools and 45 in general secondary schools.

Enrollment in Early Levels of Schooling

According to the 2002 HBS data, 97 percent o f children aged 6 to 14 are either enrolled in school or have completed the basic education cycle. Parental schooling i s a very good predictor o f children’s enrollment level: about 70 percent o f the children who are not attending school (but who are of school age) have at least one parent who has not completed primary school.

An econometric model o f enrollment in secondary schools reveals that males are 7 to 8 percentage points more l ikely to continue their education beyond compulsory schooling. Secondary school availability in the residential area has a strong predictive power, boosting the probability o f enrollment by 10 percentage po in ts -on ly 64 percent o f households reported that a secondary school i s available in their residential area. Other important correlates o f secondary school enrollment are household wealth and presence of a mother in the household.

Universities and The Poor

In Turkey, entrance to universities i s primarily based on a student’s performance in a centrally administered examination. Grades in secondary school (and a specialized f ie ld in secondary school) are other factors that influence the overall score. An analysis o f the 1997 University Student Survey found that students f rom high-income families are much more l ike ly to be enrolled in private universities and well-established institutions. Thus, (the few) students f rom poor households who are enrolled in universities do not enroll in universities o f the same quality as those o f wealthier students.

Some o f the other findings were that private tutoring plays a key role in determining who attends what type o f university. As the main reason for not receiving private tutoring, 57 percent o f surveyed undergraduate students mentioned lack o f economic resources.

Parental Views About Quality of Education

Analysis o f 2001 household survey data reveals that household members are more l ikely to report problems with public schools (36.7 percent) compared to private schools (25.8 percent). The lack of books and supplies emerges as the leading problem-reported as a problem for 15 percent o f children enrolled in public schools and 10 percent o f children enrolled in private schools. The next major problem i s poor teaching (in both public and private schools), reported in roughly 10 percent o f cases. The

V

urbadrural differences are pronounced-only 45 percent o f rural responses indicated “no problem with school” as opposed to 68 percent in urban areas.

The wealthier are much less l ikely to report problems with school. Complaints about lack o f books and supplies decline rapidly with increases in household wealth. Complaints about the condition o f facilities also decline with wealth. Whi le complaints about poor teaching remain constant across al l wealth groups, complaints about lack o f teachers decline with wealth.

Schooling Attainment and Selected Labor Market Outcomes

Private returns to schooling are very high in Turkey. The gender gap in earnings i s visible-on average-- males earn 45 percent more per hour than females with similar characteristics. Schooling has a robust, positive, and large impact on earnings for both genders. If one estimates separate earning regressions for males and females, the impact o f schooling on earnings i s found to be more pronounced for females. In other words, while females earn less on average, the variation in earnings by schooling attainment i s more significant for females when compared with males. These findings, jo in t ly with the finding that only 15 percent o f those who report non-zero wages are females, suggest that by under-investing in girls’ schooling and by operating with extremely l o w female labor force participation rates, Turkey foregoes a vast potential human capital resource that can fuel the economy. Finally, contrary to common perceptions, the unemployment rate among vocational secondary graduates tends to be at about the same level as the unemployment rate among general secondary school graduates.

E. HEALTH

The Health Care System

Turkey’s health care delivery and financing system i s fiagmented. Both public and private providers supply health services. The Ministry of Health (MOH), the Social Insurance Organization (SSK), and university hospitals are the main providers. Whi le the public health care sector primarily predominates, private sector provisions are gaining importance in western and urban parts o f the country.

Despite significant efforts, the service delivery network remains highly uneven, with major concentrations in urban areas, particularly in the western part o f the country. This skewed distribution has l ed to significant regional differences in access to and use o f health care and, concomitantly, health outcomes.

Health Insurance

Several public health insurance schemes currently provide financial protection to various target groups. SSK’s health insurance i s the most important one, catering to those employed in the formal sector. The green card system, introduced in 1992, i s intended to provide coverage to l o w income groups who are not cove4red otherwise. The Government soon plans to shift to universal health insurance, which would operate on the principles o f solidarity and r isk pooling, and provide coverage to the entire population.

Both DIE H B S and Household Consumption and Income Survey (HCIS) suggest that over one-third (36 to 37 percent) o f the population in Turkey does not have access to health insurance, and almost h a l f the population in rural areas remains without any coverage. The green card program fails to provide broad coverage to a l l those living in poverty. Thus an important share o f the lowest-income households remains without access to health insurance coverage even if they may be eligible for it, and makes significant out-

HCIS i s an unofficial survey which was not conducted by DIE.

v i

of-pocket payments when seeking health care. The lack o f insurance coverage leads many l o w income households to forego health care, which in turn negatively affects their health outcomes.

Health Outcomes

Despite considerable progress achieved in the recent past, Turkey continues to rank far behind most middle-income and European Union (EU) accession countries on key health indicators. Health outcomes vary significantly across regions, reflecting the uneven supply o f and access to health care in various parts.

The Turkish health system faces a dual challenge. Significant parts of the population continue to be afflicted with a high burden o f disease fi-om preventable infectious diseases, and high maternal and infant mortality rates as i s typical o f developing countries. At the same time, a growing share of the population i s affected by non-communicable diseases prevalent in developed countries.

Access To and Use of Health Care

People with health insurance, including a green card, are more l ikely to seek health care when ill than those without insurance. The likelihood o f seeking care when ill i s lower among the bottom two quintiles than among the upper quintiles, with the difference being particularly marked in rural areas. Low-income groups suffer fi-om significant access problems.

Determinants of Care Seeking

The prime reason for not seeking care when sick, or not seeking hospital admission when required, was lack o f affordability. One out o f f ive people fi-om the lowest income quintile who sought outpatient care reported that the main problem with the care was that it was too expensive. Lack o f a facility nearby did not appear to be a prime determinant o f not seeking care when ill.

The share o f the population that had to pay for outpatient treatment, drugs, and hospitalization i s higher among the lowest income quintile than among the upper-income groups. Furthermore, a multivariate analysis o f the determinants o f health care-seeking behavior confirms that income, insurance coverage, household size, gender o f household head, and severity o f illness are the most important determinants o f an individual seeking health care.

Health Care Expenditure

Out-of-Pocket Payments. Households in Turkey allocate a modest share o f their total expenditure to health care in the form o f out-of-pocket payments. Income is a major deciding factor on the amount spent. The top quintile spends about twice as high a share o f total household expenditure o n health care as the lowest quintile. The largest share o f out-of-pocket expenditure o n health i s allocated to the purchase o f drugs, with payments for outpatient consultation ranlung second across a l l income levels.

Public Expenditure on Health Care

Public expenditure on health care grew at an average annual rate o f 7.3 percent between 1999 and 2003. The main public financiers are the Central Government and the social security institutions. According to the recent National Health Accounts study estimates in Turkey, Central Government funding accounts for over one-third o f Turkey’s health care expenditure, employer contributions account for less than one-fifth, and households pay over two-fifths through out-of-pocket payments and social security contributions.

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Public sector spending on health care i s skewed in favor o f the upper income groups, particularly spending on outpatient care. Budgetary funds are not well targeted toward assuring equitable access by the entire population. Thus, overall, the relatively important public subsidies to health care are benefiting the middle- and upper-income households, while the poor continue to face significant access barriers to health.

F. LABOR MARKET IN TURKEY

In Turkey, as in most countries, poverty i s closely related to employment status and the type o f job, whether formal or informal. Informally employed and casual workers have a higher rate o f poverty. Education plays a key role in explaining employment and poverty outcomes.

Unemployment and Labor Force Participation

Unemployment in Turkey was 10.3 percent in 2002. Labor market outcomes are mostly driven by low levels o f labor force participation. Those who do not work drop out o f the labor force, and are thus not captured in the unemployment rate figures. The poverty rate o f the non-participants in the labor force reflects strongly the situation o f children: inactive household members younger than 15 years of age had a poverty rate o f 35 percent, but older inactive household members had a poverty rate o f only 22 percent, under the total poverty rate. There are very sharp differences in labor market participation rates between men and women, with extremely low rates o f female labor market participation in Turkey and even decreases in the rate for females since the 1999 level o f 30 percent, down to 27.9 percent in 2002. The male labor force participation rate was 72 percent in 2002, or more than tw ice that o f women’s. Female unemployment rates have typically been slightly lower than the male unemployment rate. Th is i s primarily because so few women are in the labor force

Unemployment and Inactivity

In 2002, 35 percent o f those aged 12 and above reported that they had worked in a paid job in the month o f the survey. The poverty rate o f these 35 percent was 25 percent. Another 43 percent o f those aged 12 and above who reported that they did not work had almost the same poverty rate (24 percent poor) as the employed.

In terms o f unemployment, only 7.2 percent o f those aged 12 and above reported that they were looking for a job. Households with employed heads had a poverty rate o f 26 percent compared to 35 percent where the household head was unemployed.

Reasons for not seeking a job varied f iom factors relating to age or family structure (student, housewife, elderly) to disability or seasonal employment.

Quality of Employment

In Turkey, there exists a strong association between the type o f employment and the poverty status o f the individual or household. Poverty rates o f those who had permanent employment were lower compared to those with casual or temporary jobs. The relative risk o f poverty for casual workers was 3.7 times greater than for the permanently employed. Poverty rates for self-employed and unpaid family workers were higher.

Poverty was also found to be sharply associated with a lack o f registration at a social security institution. Of the 35 percent who reported being employed, 32 percent were enrolled in social security. The poverty

... Vl l l

risk for people with formal jobs was the lowest for those employed by the government and in state-owned enterprises. However, i t should be emphasized that very few people have such employment.

Poverty i s associated with the size o f the enterprise. People employed in larger f i r m s were less l ikely to be poor compared to people fkom firms with 1 to 9 people. Almost 70 percent o f the respondents (aged 12 and over) reported that they worked in a firm o f 1 to 9 people, and thus had a higher poverty rate. The mean number o f hours worked by the poor was 43.4 per week, whereas by the non-poor, i t was 46.3 hours. Also, the mean duration o f employment o f the poor in the same low-paying job was longer than o f the non-poor.

Sector of Employment

The largest sector o f employment in Turkey i s agriculture. Agriculture i s also the sector with the highest poverty rate o f those employed in it. O f the 35 percent aged 12 and above, 40 percent are engaged in agriculture. The next-highest poverty rate i s that o f construction. The poverty rate i s lowest for mining and quarrying. After agriculture, the other significant sectors in terms of employment are manufacturing, and wholesale and retail trade.

G. SOCIAL PROTECTION IN TURKEY

Social protection in Turkey consists primarily o f limited formal systems in pensions and social assistance, supplemented greatly by informal mechanisms. Formal elements o f social protection are the pension (social security) system, and the Social Assistance and Solidarity Encouragement Fund (SYDTF) and i t s 93 1 affiliated Social Solidarity Foundations (SYDVs).

Turkish Pension System

Turkey’s social security system i s highly fragmented. Benefits and contributions depend on one’s occupation. Sosyal Sigortalar Kurumu (SSK) covers the bulk o f the labor force, especially private sector employees, and those public sector employees who do not qualify as civi l servants. Civi l servants are covered by Emekli Sandigi (ES), and the self-employed and farmers are covered by Bag-Kur (BK). Also, there are separate occupational schemes that cover various other groups.

Overall, 42 percent (1 1 mil l ion people) of the labor force i s contributing to one or the other scheme. On the beneficiary side, only 29 percent (1.2 mil l ion people) o f the population over age 65 i s receiving an old-age pension. However, almost 3 mill ion individuals below the age o f 65 are receiving pensions, primarily old age pensions, with many of the recipients considerably younger than 65. As a result, the pension system i s showing large fiscal losses each year and i s in need o f transfers from the government to cover those losses expected to be around 4 percent o f GDP in 2004.

SSK i s by far the largest system, and covers mostly private sector employees. Employers contribute 11 percent o f wages for pension, and employees contribute 9 percent o f wages. In 1999, the Social Security Law changed most of the SSK benefit parameters. Pre-reform and post-reform benefits are discussed in detail in the social protection chapter.

Bag-Kur primarily covers the self-employed and some farmers. Contribution rates are 20 percent for pensions and 20 percent for health coverage. To combat the perennial problem o f evaluating income eamed, Turkey uses the system o f minimum earnings steps, which are attributed to individuals regardless o f what they actually eam.

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Bag-Kur has a very low collection rate for its contribution revenue. Workers pay very little during their working years, and just prior to retirement, they pay Bag-Kur a lump-sum equivalent to the past-due contributions with interest, and then receive their retirement.

Emekli Sandigi covers civi l servants, including military personnel. Financing o f Emekli Sandigi i s somewhat different from the other plans in that health insurance during working years i s not covered by the pension fund. Instead, i t i s covered directly by the l ine ministries in which the civi l servants are employed.

Another difference between Emekli Sandigi and other schemes i s that the basis for contributions and the basis for benefits are different. Contributions are paid on the basis o f basic salary. On the other hand, when pension benefits are paid, they are paid on full remuneration. Thus, there i s both a financing gap and an equity issue, where lower-grade workers pay contributions on a larger share o f their salary than higher-grade workers.

Noncontributory Pension Benejh. Turkey also provides a small noncontributory benefit to those over age 65 who earn below the level o f the benefit.

Social Assistance and Solidarity Encouragement Fund

The Social Assistance and Solidarity Encouragement Fund (SYDTF) i s an extra budgetary fund financed by earmarked taxes and administered by a Cabinet Minister. The SYDTF, together with its local affiliates, i s the largest program o f social assistance in Turkey in terms o f number o f beneficiaries.

Conditional Cash Transfers

Conditional Cash Transfers (CCTs) are a national program recently introduced in Turkey, supported by a loan from the World Bank, the Social Risk Mitigation Project (SRMP). CCTs are payments made to the mothers of poor children, provided they attend school or visit health clinics. CCTs are important tools that are targeted to the poorest o f the poor, many o f whom are not able to afford the out-of-pocket expenses o f sending their children to school. In May 2005, 1.6 mil l ion children and 7,000 pregnant women benefited from the program.

Local Initiatives

Supported under the SRMP, the Government o f Turkey has undertaken a significant expansion o f the microprojects traditionally handled by the SYDVs with approval from the SYDTF, along with a tightening o f procedures. At the end o f 2004, 94,490 people benefited from income generation, employment, and social service opportunities under the SRMP Local Initiatives component, which seeks to provide these people with sustainable livelihoods, thereby l ift ing them permanently out o f poverty.

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CHAPTER I: DATA COMPARABILITY, 1994-2002

The State Institute o f StatisticsiWorld Bank ( D I E M ) team analyzed the data from the 1994 and the 2002 Household Budget Survey (HBS) to (a) assess comparability o f consumption measures o f welfare between the two main surveys datasets, (b) establish comparable poverty lines, (c) and discem trends in poverty and inequality in Turkey between 1994 and 2002. The 1994 and 2002 HBS are the largest and the only nationally representative household surveys in Turkey for 1987-2002.

The in-depth analysis has shown that the results o f these surveys are broadly comparable, and offer a solid base for analyzing dynamics o f living standards and poverty in Turkey. Comparisons o f living standards in Turkey between 1994 and 2002 are extremely sensitive to the price indexes used to convert current nominal figures into real values. Between 1994 and 2002, prices increased between 53 and 67 times, depending on the indicator o f inflation. The cost o f living in Turkey increased more rapidly than the GDP-based deflator would suggest.

The use o f appropriate deflators and consumer baskets reflecting the consumption pattems o f the population reveals that living standards between 1994 and 2002 remained almost unchanged. Inequality, on the other hand, increased only marginally, remaining high by regional standards. The combination o f unchanged inequality and zero growth in real consumption produced the outcome whereby absolute poverty remained unchanged between 1994 and 2002. Intemationally-based measures o f extreme poverty show a deterioration, while national poverty lines, anchored exclusively on food, indicate some improvement. This discrepancy reflects significant changes in relative prices over time, with food becoming cheaper, and non-food goods, mainly services, becoming relatively more expensive.

The DIEiWB team concluded that these results are consistent with macroeconomic data, and are robust with respect to measurement assumptions.

A. REAL INCOME AND CONSUMPTION OF HOUSEHOLDS BETWEEN 1994 AND 2002

The timing o f the two major surveys in Turkey-1994 and 20024ic tates the frame for the comparisons. Table 1.1 shows main macroeconomic indicators o f living standards based on national accounts and survey-based estimates o f consumption. Key macro-based measures o f living standards are gross domestic product (GDP) per capita and personal consumption per capita. Per capita GDP i s not a particularly good measure o f standard o f living; it i s a measure o f the total output in the economy, which includes many items such as investment goods that do not make a contribution to the household welfare. Moreover, i t has no direct relevance for poverty measurement. That i s why another measure-per capita personal consumption-will be used in the table.

Table 1.1 presents two measures o f personal (household) consumption based on survey data. The f i rst measure i s constructed according to the principles o f National Accounts (NA) methodology ; the second measure intends to capture current consumption components, which i s more appropriate for the analysis o f poverty and inequality. I t i s also more appropriate to take into account economies o f scale in the household, which are influenced by the household size.

The table shows that there i s a gap (as in al l countries) between consumption measured in NA and consumption measured in the surveys (this i s due in part to different definitions, and to underreporting). However, while this gap existed in both 1994 and 2002, i t has narrowed over time: in 1994, the total consumption estimate based on the survey was around 55 percent o f the NA estimate; in 2002, it

increased to 66 percent. That i s why the comparison of the two surveys gives higher growth rates o f consumption than suggested by macro indicators. A slight fal l in household size contributed to marginally slower growth o f the main welfare indicator per equivalent adult compared to changes in the per capita measure.

GDP, current prices, mil l ion TL* Total personal consumption (from NA), mil l ion TL* Per capita GDP, current TL Per capita personal consumption, current TL

Table 1.1. Macroeconomic and Household Survey-Based Data on Living Standards, 1994-2002

4,027,176,295 277,163,385,986 69 2,706,262,470 184,036,488,295 68

67,729,991 4,052,509,121 60 453 14,554 2,690,866,056 59

1994 I 2002 I Change,

Per caoita annual consumation INA method). current TL 24.917.311 1 1.762.864.991 I 71 ,I I , I , I - .~

Total household consumation (PA 1994 method). mil l ion TL I 1.500.338.527 I 116.349.713.174 I 78 I ! , , , , , , , ~~~~~ ~~

Per capita consumption (PA 1994 method), current TL 25,233,044 1,701,192,501 Consumption per equiv. adult (PA 1994 method), current TL** 40,427,172 2,667,781,670

Memo: Population 59,459,277 68,393,032 Number o f households 13,342,055 16,446,644 Average household size 4.456 4.15848 Average equivalent size o f household** 2.71 2.58

67 66

1.15 1.23 0.93 0.95

The main factor affecting direct comparability o f poverty fkom various years in Turkey i s inflation. Table 1.1 shows that consumption increased 66 times as measured by the survey. Of course, this has to be seen against the background o f high inflation. Table 1.2 lists main price indexes for 1994-2002. There are clear differences between different price indexes-note especially the Consumer Price Index (CPI) and GDP deflator. It i s not unusual, o f course, for fixed-weight price indexes (Laspeyres) such as the CPI to exceed indexes with variable weights (Paasche), such as GDP deflators, especially during high inflation. The geometric average o f the two indexes i s often used to obtain the best estimate o f the true change in the cost o f living. The GDP private consumption deflator would be close to such an estimate. I t i s our preferred measure o f changes in real cost o f living in Turkey. Also worth noting i s the difference between the increase in food prices and total CPI, suggesting changes in relative prices. Exchange rate- based indexes show much slower change in prices than proper price indexes. This calls for extreme caution in using various measures o f prices for making comparisons over time.

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Table 1.2. Indexes for Deflating Nominal Values: 1994 and 2002,1994 = 1.00

GDP deflator 1 53.0 GDP private consumption deflator 1 59.6

Current PPP exchange rate, to USD 12,096 663,575 Current exchange rate, to USD 29,826 1,504,119

Change, Times 1994 2002

CPI all 1 66.5 66.5 CPI food 1 58.2 58.2

53.0 59.6 50.0 55.0

1994

deflator data are from World Bank 2003a.

Change, Times 2002

Based o n different price indexes, the changes in mean real consumption are depicted in Table 1.3. The table clearly shows that when measured with the proper cost-of-living index (the personal consumption deflator f rom the national accounts), per capita indicators o f living standards have not changed much. CPI-based figures show a decline, while exchange rate-based indexes and total GDP deflators increase in real consumption. The table also shows that the comparison i s extremely sensitive to the price indexes used, and that the preferred measures based o n macroeconomic data and based on surveys consistently show practically zero growth o f real consumption between 1994 and 2002.

Table 1.3. Change in Main Indicators for Real Incomes and Consumption, 1994,2002

** 1994 equivalence scale (nutrition based). Sources: SIMA unified survey 2002, the World Bank for real GDP and gross national income (GNI) per capita data, other data provided by DIE.

The baseline survey-based measure-per capita consumption (highlightedhincreased by only 1 percent between 1994 and 2002 (while the per equivalent adult measure fe l l by 1 percent)-in l ine with the corresponding macro variable.

The picture o f the relative stability o f consumption in real terms i s qualified when annual indexes are used instead o f point-to-point comparisons. The extreme volati l i ty becomes evident. The NA measure of the population’s living standard-private consumption per capita deflated with the GDP personal consumption deflator-shows modest growth between 1994 and 2002. But once the CPI price index i s

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used, the result i s the opposite: real consumption fe l l between 1994 and 2002. The current dollar consumption shows even greater volatility. Overall, in 2002 i t appears to have increased only when compared with the through figures o f 1994 and 2001 (Figure 1.1).

Figure 1.1. Consumption Per Capita with Various Deflators, 1990 - 100

- Private consumption per capita, constant prices, private constant deflator

Private consumption per capita, current USD

Private consumption per capita, constant prices, CPI

I t i s evident that such an outcome i s driven by different trends in price indexes. Figure 1.1 illustrates this point. For the entire period, the CPI index was above both GDP deflators.

Figure 1.2. Price Indexes in Turkey, 1990-2002, Annual Percentage Changes

to

ev pr

ye ar =I nn

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

-Inflation, CPI

GDP private consumption deflator

-GDP Deflator

Exchange rate chain index

4

B. INEQUALITY I N CONSUMPTION OF HOUSEHOLDS BETWEEN 1994 AND 2002: HBS

Inequality, Gini for 1994 consumption per equiv.

Inequality, Gini for 1994 consumption per capita adult*

Inequality as measured by consumption from H B S has not changed much once the same standards in constructing the consumption aggregate and equivalence scales are applied to the 2002 data, as were used by the Wor ld Bank with the 1994 data (see Table 1.4 and Annex I).

Change, Times 1994 2002

0.385 0.390 1.01

0.408 0.413 1.01

Table 1.4. Inequality

c. POVERTY LINES: 1994 AND 2002 METHODOLOGY

There are important differences in defining the poverty l ine according to 1994 and 2002 methodologies. They arise mostly f rom the composition o f the minimum food basket. The 1994 methodology used a minimum food basket developed by Hacettepe University. The new methodology proposes to use actual (HBS) survey data to obtain the composition o f the minimum food basket. The H B S provide us with expenditures and quantities of each food i tem consumed by the households. The 2002 H B S analysis team determined the average expenditure and average quantity o f each food i tem in each population decile. Based on the U.S. Department of Agnculture (USDA) database (available o n the Wor ld Wide Web), the team also obtained the total calorie content o f these baskets. The calorie requirements (needs) of individuals may be used as a starting point for constructing food poverty lines. These requirements depend o n several factors such as age, sex, body weight, climatic conditions, and activity levels. The new approach takes actual consumption o f 80 main food items in the third and fourth deciles o f total consumption, calculates total caloric value, and scales each quantity proportionately so that the total calorie intake f rom the basket i s 2,100 Kcal on average per person (or 2,450 K c a l per adult).

The quantities obtained are quite different f rom the Hacettepe University basket, previously used in Turkey. Table 1.5 demonstrates that the Hacattepe basket i s quite different f rom actual food consumption patterns. The new 2002 methodological approach also follows “best practice” by defining products very narrowly (down to 10-digit codes), whereas the Hacattepe basket i s defined in broad product groups, which again has implications for pricing the basket properly.

Based on the value o f a minimum food basket, the non-food component was estimated based on the actual consumption structure o f the poor. This part o f the methodology i s very similar t o the approach developed before for the analysis of the 1994 data in the previous Poverty Assessment (World Bank 2000), but has some differences in details, producing slightly different results. T o obtain the real value o f a 2002 basket o f food and non-food goods for 1994, components o f the CPI (food and non-food) were used. With the 1994 data, to update the poverty l ine to 2002, direct survey-based prices were used to obtain the value o f the minimum food part, and the fixed markup was updated using the non-food CPI index (regionally differentiated). This makes the 1994 baseline comparisons more accurate.

5

Table 1.5. Food Basket for Equivalent Adult: 2002 Survey-Based and Hacettepe University (kilograms per day per adult)

n.e.c. = Not elsewhere classified,

To complement these national poverty lines, the team also developed a set o f international poverty lines. The 1990 World Development Report presented for the f i rst time the global estimates of poverty on the basis of a US$l-a-day poverty line estimated using the 1985 purchasing power parity (PPP) exchange rate. Since, in the late 1990s, 1993 PPP exchange rates were available for a large number o f developing countries, the World Bank re-estimated the international poverty line. Local poverty lines were used for 33 countries, converted to 1993 PPP dollars. The median poverty l ine o f 10 countries with lowest poverty l ines was calculated to be equal to US$l.OS per person per day, and it was adopted as the new international poverty line. I t should be noted that this new poverty line i s not strictly comparable to the US$ l -a-day poverty line in 1985 PPP dollars.

The US$1-a-day poverty line i s appropriate only for low-income countries that are situated in tropical regions. People living in the Europe and Central Asia (ECA) region have to face a harsh, cold climate, which requires them to heat their houses, wear warm clothing, and ingest even greater energy in kilocalories (Kcal) to maintain the same metabolism. Their basic needs are obviously very different from other countries, so their poverty l ines should also be different. That i s why E C A countries are currently using PPP US$2.15 and PPP US$4.30 lines for international comparisons. In addition, the 1993 PPP conversion rates are not available for the Commonwealth o f Independent States (CIS). However, the 1996 PPP conversion rates were available for the CIS countries. The recommended US$2.15-a-day PPP uses the same methodology as the standard US$1-a-day methodology by taking the median o f countries with the lowest national poverty lines converted with the 1996 PPP.

Turkey has all PPP estimates needed for such calculations: 1985, 1993, and 1996. In addition, PPP rates are available for each year. Thus (although it i s not a correct application o f the World Bank methodology), one could use each year’s estimate o f PPP. I t must be emphasized, however, that PPP exchange rates were not designed for making international poverty comparisons; they were mainly designed for comparing aggregates from national accounts. The PPP exchange rates are based on prices of commodities that are not representative o f the consumption baskets o f the poor. More important, weights in the PPP baskets o f goods and services do not adequately represent the consumption basket of the poor. That i s why using CPI indexes to update the base year estimate i s required. Consistent estimates are obtained using either (a) the 1996 PPP, as done by ECAPOV, converted to current Turkish Lira (TL) using the CPI to 1994 and 2002 prices; (b) or the 1993 PPP, converted to current TL using the CPI.

6

Table 1.6 presents the main variants o f setting the poverty line. The two top rows present two variants o f setting the poverty lines based o n methodology proposed in jo in t DIE/WB work o n the 1994 H B S data, and the new methodology used in this report t o set the poverty l ine (2003). Lower rows give values for the international poverty l ine (US$1-a- day per capita at PPP) and the relative poverty line.

Food basket, 1994 (Hacateppe), TLlday* Poverty line, 1994 methodology, TL/day**

Food basket, 2002 methodology. TLlday**** Poverty line, 2002 methodology, TLlday***

Table 1.6. Poverty Lines, 1994-2002

38,794 2,159,424 56 69,142 4,712,879 68

18,571 1,082,2 1 1 58 38,928 2,510,930 65

I I I I I

USD current PPP US$1 a day, TLlday**** USD 1985 PPP US$1 a day, CPI to update, TLlday* * * * USD 1993 PPP US$1.08 a day, CPI based, TLlday*** * USD 1996 PPP US$1.08 a day, CPI based, TLlday****

60% o f the median 1994 methodology cons, TL/day**

12,096 663,575 55 -

14,803 984,375 67

13,221 879,195 67

15,266 1,015,205 67

50,246 3,3 19,177 66

Consumption 1994

Consumption 2002

D. POVERTY IN 1994 AND 2002: HBS

POVERTY LINE METHODOLOGY

Poverty Line 1994 Poverty L i n e 2002 Est. 1994 HBS + Est.

2002 HBS

New report, only 2002 HRS

PA (2000): 1994 HBS (baseline) + Est. 2002 HBS

X X

I t i s impossible to apply a l l elements o f the methodology in the same way to 1994 as to 2002. The consumption index developed for the 2002 H B S i s more accurate, but it i s impossible to replicate this methodology with 1994 H B S data. The decision was therefore to recalculate the consumption indicator in the 2002 dataset to make i t completely identical to the 1994 indicator. With this indicator, a variety o f poverty lines are used: 1994 and 2002, and the international PPP-based lines. The comparison undertaken i s presented in Table 1.7 by “X”.

Table 1.7. Comparison of Poverty in Turkey Between 1994 and 2002, with National Absolute Poverty Line

7

Based on comparable consumption measures (see Annex I) and comparable poverty lines, Table 1.8 presents results.

National poverty l ines Economic vulnerability, 1994 Complete PL 36.3% Poverty, 1994 Food PL 7.3%

Table 1.8. Poverty Incidence with Comparable Consumption Aggregate, Equivalence Scale and Poverty Lines

34.5% 0.95 4.9% 0.67

1 1994 1 2002 1 I Times

Poverty, 2002 complete PL Extreme poverty, 2002 food PL

28.3% 27.0% 0.95 2.9% 1.4% 0.48

r t I t I

World Bank international l ines WDR 1990 method: 1985 PPP US$l a day Updated WB: US$1.08 at 1993 PPP a day Updated WB: US$2.15 at 1993 PPP a day

2.5% 3.2% 1.28 1.7% 2.0% 1.18

15.9% 16.8% 1.06

ECAPOV

US4.30 at 1996 PPP a day US$2.15 at 1996 PPP a day 22.1% 22.6% 1.02

6 1 .O% 60.6% 0.99

I I I I I Current PPP exchange rate

Poor, US$2.15 per day Poor, US$4.30 per day

Poor, US$l per day 1.1% 0.2% 0.18 15.3% 9.2% 0.60 5 1.7% 38.9% 0.75

Using the 1994 methodology with the 1987 data leads to the result that 38.5 percent o f the population was poor in 1987, suggesting that there has been a gradual decline in poverty over the last two decades, but that the many shocks experienced in the macroeconomy meant that poverty did not decline significantly over the period. Figure 1.3 presents this information graphically, combining the “stock” measurement of poverty in 1987, 1994, and 2002 with the “flow’’ data on GPD growth over the time period.

Figure 1.3. Turkey: Poverty and GDP Growth

8

The relative poverty l ine can be used to make some comparisons o f consumption poverty. The relative line i s fixed as a constant share o f the median consumption. However, note that such figures will not be entirely comparable, because the methodology requires recalculation o f the poverty line for each year. Using 60 percent o f the current year per equivalence adult (using the 1994 scale) consumption as a cutoff, 20.1 percent o f the population was below the poverty l ine in 1994, which increased slightly to 21.5 percent by 2002.

I Date- I

The use o f international poverty lines allows cross-country comparisons. The decision to compare Turkey with other countries in ECA dictates the choice o f poverty l ines (Table 1.9). Because countries differ in the quality o f their survey data, the table ranks all countries by the ratio o f survey-based consumption mean to the estimates o f personal consumption from national accounts. Turkey seems to occupy a unique position with respect to this indicator. The closest comparator countries, in terms o f both national income per capita and o f survey coverage o f personal consumption, are Lithuania and Latvia. Both countries have dramatically lower poverty. Such comparison highlights the significant role o f inequality in Turkey as a driver o f poverty. High inequality in Turkey worsens poverty considerably.

Survey 1

Table 1.9. Absolute Poverty Rates of Europe and Central Asia (ECAPOV methodology)

TURKEY TURKEY

I Survey I Headcount I Headcount I Ratioof I 1998GNP I 1998GNP 1

US$2.15/Day US$4.30/Day To N A Private Atlas Per Capita Cons. Method

1994 22.1 60.9 0.55 2,640** 5,873" 2002 22.6 60.6 0.63 2,500** 5,285"

Belarus

Tajikistan

1999 1 10.4 0.99 2,180 6,318 1999 68.3 95.8 1.02 370 1,040

9

IAzerbaijan 23.5 I 64.2 I 1.39 I 480 I 2,168 * For Turkey, GDP data for corresponding years are used. ** GNI. The survey for Albania did not cover the capital city Tirana. Note: Recent household survey data are not available for Bosnia and Herzegovina and Uzbekistan. Private consumption data are not available for Tajikistan, Turkmenistan, and Kazakhstan. GDP per capita in current prices i s used instead. Private consumption data for Azerbaijan are for 1998; GDP per capita (first half 1999) are used for Ukraine. The poverty headcount numbers are based on the international poverty lines of US$2.15 and US4.30 per person per day; PPP estimates are for 1996. Sources: “Making Transition Work for Everyone.” Turkey-estimates based on 1994 and 2002 HBS.

E. USING THE 1994 HBS AND 2002 HBS TO DECOMPOSE CHANGES IN POVERTY

Methodology

Poverty can change over time depending o n two factors. The f i rs t factor i s the magnitude o f economic growth rate; the larger the growth rate, the greater the poverty reduction. The second factor i s the distribution o f benefits o f growth; if the benefits o f growth go more to the poor than to the non-poor, then the poverty reduction will be larger. Poverty levels can then fal l for two reasons: either growth increases the consumption o f a l l members o f society, or the share o f the poor in total consumption increases due to shifts in the distribution o f total welfare. On the other hand, poverty may rise i f either consumption falls or the distribution shif ts against the poor. Often the two processes-growth and redistribution-operate simultaneously, and they reinforce each other if they work in the same direction, or weaken each other.

Decomposition of poverty changes. Changes in poverty can be decomposed into changes due to growth and changes due to an increase in inequality. T h i s decomposition i s crucial to proper identification of the link between poverty and growth. Figure 1.4 illustrates the principles o f such decomposition (see Bourguignon 2002).

Figure 1.4. Poverty Changes

0.5

0.4

0.3

0.2

0.1

0

-initial distr. -new distr. ----only mean shift

10

Initially the poverty rate i s equal to A+B+C, that is, to the area below the initial distribution to the left of the poverty line. When the distribution changes to the new one, the new poverty rate equals A. The difference, area B+C, can be split into a growth component, area C, which shows how the poverty would have changed if only growth effect had been in place (that is, without a change in the shape o f the distribution-only shift in mean). Area B i s the additional poverty reduction achieved due to falling inequality.

The move from the initial to the new distribution can be regarded as the combination o f two effects: a pure proportionate growth effect captured by the rightward shift o f the distribution function; and a pure redistribution effect. This allows the total change in poverty to be decomposed in a similar fashion, taking into account the contribution o f income growth and redistribution. In the situation portrayed in Figure 1.4, the two effects reinforce each other to produce a significant reduction in the headcount poverty rate, but the same analysis can also be applied in less-favorable circumstances.

Formally, we calibrate the distribution o f well-being relative to the poverty line.5 Poverty (P) i s then a function o f mean consumption and the Lorenz curve, or P(z/p,L), where z i s poverty line, p i s mean consumption, and L i s Lorenz curve, showing the distribution o f consumption among individuals. This procedure allows the change in poverty for Turkey between, say, 1994 and 2002 to be expressed as: p2002-p1994= g -k d +

where the contributions o f growth (g) and redistribution (d) are defined as:

and r i s a residual due to interaction between growth and distribution.

The problem with this specification i s that g indicates the marginal effect o f the change in mean income with the distribution held constant at the initial configuration (L1994) while d computes the marginal impact o f redistribution holding mean income constant at the f inal level (pLzOo2). One can equally well generate a decomposition with the other conditions interchanged, and since there i s no logical reason for preferring one configuration over the other, symmetry arguments suggest that the two effects should be averaged to yield the growth effect:

g = ?4 [P(z/p2002,L1994)-P(~~p1994,L1994)1 + ?4 [ ~ ( ~ p 2 0 0 2 , ~ 2 0 0 2 ) - ~ ( z ~ p 1 9 9 4 , L 2 0 0 2 ) ] ,

and the redistribution effect

These expressions turn out to be the contributions associated with the level and distribution o f income in a two-way Shapley decomposition o f the change in poverty.6 We apply this, as well as a traditional decomposition, in what follows.

Every poverty measure can be decomposed in a simple way to quantify the relative importance o f growth and changes in the distribution, as shown in Dat t and Ravall ion (1992).

The Shapley decomposition i s inspired by the classic cooperative game theory problem o f dividing a p ie fairly, the Shapley solution to which assigns to each player his o r her marginal contribution averaged over a l l possible coalitions o f agents. The reinterpretation described in Shorrocks (1999) considers the various factors (n in total, say) that together determine an indicator such as the overall level o f poverty, and assigns t o each factor the average marginal contribution taken over a l l the n! possible ways in which the factors m a y be “removed” in sequence, The

11

Results: Turkey between 1994 and 2002

The annual results o f such decomposition for Turkey are presented in Table 1.10. I t i s evident that economic growth was a main driving force in poverty reduction, while inequality was acting in the opposite direction to reduce the effect o f growth.

Table 1.10 shows that poverty incidence decreased over the period by 1.77 percentage points, from 36.2 percent o f the population to 34.5 p e r ~ e n t . ~ This corresponds to an increase in the consumption (per equivalent unit defined according to 1994 methodology) by about 5 percent between these two years. If only mean consumption had changed between 1994 and 2004 and i t s distribution between the r ich and the poor had not, the decrease in poverty would have been significantly bigger than the observed decrease (poverty according to 1994 methodology would fall to about 32 percent o f the population). If only changes in the distribution o f consumption had affected poverty, as a result o f the increase in inequality (the Gini index edged up by about 1 percent) we would instead have observed an increase in poverty to 38.7 percent.

Table 1.10. Decomposition of Poverty Change Between 1994 and 2002 Into Growth and Redistribution Components

1994 2002 200211994 Percent Poor 36.2% 34.5% -0.0 18

Growth Component Redistribution Component Residual

Full (Shapley Decomposition) Growth Component

-0.046% +0.025% +0.003%

-0.044% Redistribution Component +0.026% Source: Calculated from DIE 2002 HBS.

This simple simulation shows both the dominance o f growth as a key factor in poverty changes, and the importance o f distribution, especially in the periods o f low growth that Turkey experienced between 1994 and 2002, when it becomes a significant explanatory factor o f poverty dynamics. Unfortunately, overall changes in mean consumption and distribution between 1994 and 2002 were quite marginal, and thus the difference i s only marginally significant. I t should be kept in mind that 1994 and 2001 were crisis years, and thus, little growth was measured in the period. Sustained growth could have had a much greater impact on poverty, had i t occurred.

particular attractions o f this technique are that the decomposition i s always exact, and the factors are treated symmetrically.

As shown in Chapter I on the comparison o f the 1994 HBS, baseline comparability can be assured only when 1994 poverty l ines and methodology are applied to the 2002 data.

12

F. CONCLUSIONS

The timing of two major surveys in Turkey-1994 and 2 0 0 2 4 i c t a t e s the frame for the comparisons. Unfortunately, due to macroeconomic instability, living standards between these two years have not improved. The conclusion that stems from this analysis i s that growth between 1994 and 2002 was not sufficiently strong to produce any sizable reduction in poverty, and the impact o f the l itt le growth there was, was dampened by an increase in inequality.

13

CHAPTER 11: MACROECONOMIC CONTEXT

Despite many advantages ranging from its strategic location to its dynamic population, Turkey has not achieved the stable high growth o f leading emerging market economies.’ No r has it matched the growth rate o f European Union (EU) accession countries such as Hungary and Poland, or the fast-growing cohesion counties such as Spain and Portugal (Figure 11.1). Turkey’s per capita income level declined from 26 percent o f the EU average in 1991 to 22 percent in 2002.9 During the same period, Poland and Hungary made significant progress in reducing the per capita income differences with the EU. On average, the Turkish economy grew slightly under 3 percent per year over the past decade-respectable, but well below the best-performing emerging economies (Figure 11.2).

Figure 11.1. Per Capita GDP at PPS: 1991-2002 Compared to EU Average

v1 a a c .- 0- z II 3 W

9 0 T-

S p a i n 8 0 7 0 P o r t u g a l An _ _ 5 0

4 0 3 0

2 0

H u n g a r y

P o l a n d

T u r k e y

Source: World Bank

Figure 11.2. GDP and GDP Per Capita Growth Rates in Emerging Economies (1965-2001)

1 0

8

- 6 s - 4

2

0

I

.. .

Source: World Bank

This chapter draws o n “Turkey: Country Economic Memorandum-Towards Macroeconomic Stability and

These figures do not reflect the informal economy, wh ich is l ike ly to be substantially larger as a percentage of

8

Sustained Growth,” July 28, 2003, Wor ld Bank Report No. 26301-TU.

GNP in Turkey relative to the EU average.

14

A. MACROECONOMIC INSTABILITY HAS HELPED KEEP GROWTH BELOW POTENTIAL

Analysis suggests that macroeconomic instability-among many factors-has played an important role in Turkey’s inabil ity t o realize i t s full growth potential. Cross-country comparisons and analytical work suggest that countries that grew faster than Turkey did so in part because they achieved a greater degree of macroeconomic stability, accumulated physical capital faster, invested more in human capital, and did more to improve government effectiveness and the business climate. Of a l l these factors, the contrast in the degree of macroeconomic stability stands out. Turkey has suffered from an exceptional degree of macroeconomic instability characterized by chronically high inflation and sharp swings in the business cycle. Many emerging market countries have experienced large fluctuations in either growth or the real effective exchange rate (REER), but Turkey experienced instability in both (Figure 11.3). Repeated attempts to stabilize the economy fel l short, and high growth was never sustained for long. Inflation was higher and growth lower, o n average, in the 1990s than in the 1980s. Income volati l i ty doubled during the 1980s and 1990s as the standard deviation o f real GDP growth increased f rom 2.7 percent t o 5.5 percent. The boom-bust cycle has continued into the new decade, with a record contraction o f real gross national product (GNP) o f over 9.5 percent in 2001, followed by a strong recovery, with estimated growth o f 7.9 percent in 2002.

Figure 11.3. Turkey: REER and GDP Growth, 1990-2000

1 2 + 10 -

5 s 2 S 6 > 4

2

0

U

+ T u r k e y

T h a i l a n d

C h *

0.5 0 . 1 5 1 1 . 2 5 1.5

C V : G D P ( C h % )

g r o w t h rates o f t h e v a r i a b l e s v a r i a t i o n a p p l i e d to S o u r c e s : W o r l d B a n k , JPM o r g a n ; v o l a t i l i t y m e a s u r e d b y c o e f f i c i e n t o f v a r i a t i o n a p p l i e d to

B. FISCAL IMBALANCE HAS BEEN THE ROOT OF CHRONIC MACROECONOMIC INSTABILITY IN TURKEY

The 2000 Country Economic Memorandum (World Bank 2000a)” demonstrated that fiscal imbalances are key to understanding Turkey’s macroeconomic instability. Unsustainable fiscal pol icy has repeatedly put pressure o n the TL, fueled inflation, and undermined financial stability. Fiscal pol icy has been unable to act as a smoothing influence on the business cycle. When crises have hit, contractionary fiscal and monetary policies have been required to restore a semblance o f financial stability, worsening the real impacts o f internal and external shocks. The impact o f unsustainable fiscal pol icy o n macroeconomic stability has been magnified by Turkey’s open capital account and, until recently, its poorly regulated

lo “Turkey: Country Economic Memorandu-Structural Reforms for Sustainable Growth,” September 15, 2000, Report No. 20657-TU, World Bank.

15

banking system. Short-term capital f lows have fluctuated widely as investors responded to the boom- bust cycle driven by unstable macroeconomic conditions. The causal linkages between fiscal imbalances and instability in Turkey, as in many other emerging markets, suggest that the key to macroeconomic stability lies in sustained fiscal adjustment underpinned by credible structural reforms (Figure 11.4, data f rom Wor ld Bank 2003a).

Figure 11.4. Adjusted Public Sector Borrowing Requirement (YO of GNP)

I 25

20

~ 15

10

5

0

I

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

C. TURKEY'S EXCHANGE RATE-BASED DISINFLATION PROGRAM

In 2000, an exchange rate-based disinflation program was launched in Turkey in a bo ld attempt to rid the economy o f inflation. The centerpiece o f the program was a crawling peg exchange rate regime to act as the nominal anchor. The peg was supported by front-loaded fiscal adjustment. K e y structural reforms in social security, infrastructure, agriculture, privatization, and banhng were initiated. In fact, fiscal pol icy was significantly tightened in 2000, and inflation began to fall, dropping to 39 percent by the end o f the year. These included establishment o f an independent banking authority; passage o f legslation for an electricity market; reform of the public pension system; a constitutional amendment to al low intemational arbitration; launch o f an ambitious agriculture reform; establishment o f a telecommunications regulator; and a serious, although short-lived, acceleration o f privatization. However, these impressive achievements were insufficient to avoid a crisis, given the extent o f Turkey's underlying fiscal and financial sector weaknesses built up over decades o f instability and delayed reform.

Turkey also carried out significant structural reforms under the program.

Internal factors combined with unfavorable external developments started to undermine the exchange rate peg by mid-2000. On the external side, rising o i l prices and a prolonged slide in the Euro contributed to a softening o f Turkey's extemal accounts. On the internal front, the disinflation program was confronted with deep-rooted structural fiscal problems and a fragile banking sector burdened by huge contingent liabilities. A sharp drop in interest rates fo l lowing the onset o f the crawling p e g 4 r i v e n in part by a resurgence in short-term capital inflows-fueled a surge in demand. The economy soon began to overheat. Whi le falling, inflation did not come down as quickly as anticipated, generating a significant appreciation o f the real exchange rate under the peg. Imports increased sharply as consumption boomed, contributing to a deterioration in the current account, which recorded a deficit o f 4.9 percent o f GNP in 2000. Domestic banks took advantage o f the peg to borrow cheap foreign exchange in order to finance their expanding domestic operations, including growing purchases o f government securities and consumer

16

lending. The expansion in domestic credit contributed to the consumption boom as banks quickly built up large open foreign exchange positions and aggravated maturity mismatches in their portfolios. Bank restructuring got off to a slow start, and the state banks continued to be burdened with the costs o f large “duty losses” f rom government-mandated subsidized lending to agriculture and small and medium enterprises (SMEs). The average maturity o f Turkish L i r a (TL) deposits remained extremely short because confidence in the TL remained fragile.

A first bout of financial instability hit Turkey in November 2000, presaging the full-fledged currency crisis o f early 2001, which short-circuited the exchange rate-based disinflation program. A s banks came under increasing pressure f rom shrinking profit margins o n government securities and growing liquidity needs, isolated speculative attacks emerged in November 2000, which soon plunged the banking system into a struggle for survival. Desperate for liquidity, certain banks engaged in fire sales o f government paper, causing interest rates to skyrocket and international investors to exit the market. The result was a liquidity crunch, aggravated by the Central Bank’s inabil ity to inject additional liquidity into the system under the quasi-currency board rules added to the disinflation program just pr ior to launch o f the crawling Peg.

The situation stabilized temporarily in December 2000 when the International Monetary Fund (IMF) acted to prevent a financial meltdown by announcing an additional US$ lO b i l l ion in financial assistance. This additional financing was conditioned o n the Government’s commitment to strengthen the p r o g r a m in particular, to accelerate financial sector restructuring and privatization. The Government introduced an explicit blanket guarantee effectively covering a l l banking liabilities, excluding capital. Whi le designed to contain systemic risks in the banking system, the blanket guarantee highlighted the potentially enormous fiscal costs in case o f a systemic failure, and made explicit this contingent fiscal liability. In the wake o f these events, interest rates declined and a precarious degree of financial stability returned, but this proved to be a temporary respite. In early 2001, persistent doubts about the peg and underlying fiscal sustainability led to a full-blown speculative attack against the currency. Interest rates shot up to several thousand percent, forcing the Government to abandon the crawling peg and float the L i ra on February 21, 2001. The L i ra immediately lost 40 percent o f i t s value in a single day.

D. EXCHANGE RATE-BASED DISINFLATION PROGRAMS ARE VULNERABLE IN A GLOBALIZED WORLD

The reliance on a pegged or f ixed exchange rate in an environment o f free capital f lows and an unreformed banlung system entails risks. Exchange rate anchors-while generally successful in setting inflation o n a downward long-term trend in chronic-inflation countries-have often been associated with currency crises. Many of the exchange rate-based stabilization programs in the 1980s encountered currency crises at some stage, and the economic crises that broke out in the second ha l f o f the 1990s occurred in countries with fixed or managed exchange rate regimes. Currency attacks have often been accompanied by banking crises (for example, Chile, Mexico, and East Asia). The Asian experience shows that, with limited capital mobility, even a weak banking system can function reasonably wel l and support economic growth. However, such a system may not be able to handle massive entry and exit o f short-term capital induced by capital account liberalization in the context o f globalization. Exchange rate-based stabilization also generally results in sizable real exchange rate appreciation and a deterioration o f the current account, which can undermine investor confidence. International experience has shown that early moves to introduce exchange rate flexibil i ty can minimize the extent o f subsequent currency crises, as in Israel. Turkey’s program featured a predetermined transition to a widening exchange rate band 18 months after the launch of the peg. However, this preannounced exit-unique among pegged exchange rate systems-did not prevent the collapse o f the peg after only one year.

17

E. THE GOVERNMENT RESPONDED QUICKLY TO THE 2001 CRISIS

The Government announced a strengthened economic program in M a y 2001 in response to the crisis following the collapse o f the crawling peg and subsequent devaluation. The key structural and social elements o f the program were: (a) a macroeconomic framework designed to restore financial stability and ensure public debt sustainability-principally through a further tightening o f fiscal policy; (b) rapid restructuring o f the banking sector-especially o f state banks and insolvent private banks intervened by the regulatory authority, the Banlung Regulation and Supervision Agency (BRSA)-based o n large resource transfers f rom the budget; (c) a more ambitious program o f public sector reforms centered on deeper structural and institutional reforms to improve fiscal management and public governance; (d) a renewed privatization drive-in combination with further liberalization measures focused o n energy, telecommunications, and agriculture-and strengthening o f independent regulatory bodies to improve the private investment climate; and (e) enhanced social assistance to help low-income groups adversely affected by the crisis.

F. TURKEY’S CRISIS RESPONSE PROGRAM INCORPORATED THE EXPERIENCE OF OTHER EMERGING MARKETS

Turkey’s crisis response program benefited f rom the lessons learned by other emerging market countries facing crisis (Liviatan 2002; Brahmbhatt 2001). Immediate fiscal measures were introduced to shore up the primary surplus and strengthen confidence in the sustainability o f the public debt. A front-loaded program of bank restructuring was launched, backed by extensive fiscal resources. Bank restructuring was complemented by additional structural reforms in the financial sector designed to further strengthen prudential regulation, adopt internationally accepted financial reporting standards and practices, and enforce compliance. In parallel with accelerated financial sector reform, a comprehensive public sector reform program, including institutional reforms, was introduced to tackle the structural roots o f Turkey’s chronic fiscal imbalance. Strengthened financial and public sector reforms were placed within a medium- term programmatic framework in an effort to bolster investor confidence by demonstrating the Government’s intent t o address the core structural causes behind the crisis, and not just the immediate symptoms.

In i t ia l outcomes under the crisis response program were mixed as the Government struggled to contain the fallout f rom the crisis and reestablish i t s pol icy credibility. The immediate financial turmoil arising f rom the crisis was fairly quickly contained, but at the price o f a sharp increase in the public debt as the costs o f bank restructuring were bome by the budget. The price spike fo l lowing the in i t ia l devaluation in February 200 1 was contained, but inflationary pressures persisted, with inflation reaching 69 percent by the end o f the year (Table 11.1). Fol lowing the decision to abandon the peg, uncertainty about exchange rate pol icy persisted for some time because the Government was slow to confirm i ts commitment to the float, and the Central Bank repeatedly intervened in the foreign exchange market. Interest rates were brought down from their post-crisis peaks, but remained we l l above the projected program path throughout 200 1, mainly due to the need to r o l l over large amounts of short-term public debt in the face o f a slower-than-expected recovery in investor confidence. The primary surplus target o f 5.5 percent o f GNP for 2001 was met, but doubts continued about the medium-term sustainability o f the fiscal adjustment. The economic recession turned out much deeper than projected as real GNP shrank by an estimated 9.5 percent for the year. A major factor in the recession was the sharp turnaround in the current account driven by capital outflows. The current account recorded a surplus o f 2.4 percent o f GNP in 2001. The combination o f high real interest rates, devaluation, the huge fiscal cost o f bank restructuring, and deep recession caused the stock o f public debt to rise significantly. The ratio o f net public debt to

18

GNP increased from 58 percent of GNP at the end of 2000 to an estimated 94 percent of GNP by the end of 2001 (Figure 11.5).

Table 11.1. Key Economic Indicators

Actual 21 Est. 21 Prop. 31 1999 2000 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4

iMAIN M A C R O I N D I C A T O R S G N P Growth C P I Inf lat ion (Dec-Dec) Nomina l Interest Rate Real ex ante Interest Rate 4/ Unemployment Rate U n i t Wage Index (1997 = 100)

P U B L I C SECTOR Primary Balance (% GNP) Overal l Def ic i t (% GNP) Ne t Public Debt (% GNP) I /

Privatization ($ bn)

E X T E R N A L B A L A N C E Current account balance (% GNP) Exports (fob, S bn) 51 Tourism (% bn) External Debt (% GNP) C B T Foreign Exchange Reserves ($ bn)

o f which net external debt (% GNP)

-6.1 68.8

106.2 32.0

7.7 113.7

-0.2 22.3 61.0 20.1 0.1

-0.7 28.8

5.2 55.0 24.3

6.3 -9.5 7.9 39.0 68.5 29.7 38.0 99.1 63.5

6.5 8.4 10.3 103.0 73.9 73.1

-9.5 35.5 30.3

2.7 5.5 4.1 18.9 21.1 12.1 58.3 93.9 78.8 19.0 37.7 32.1 3.3 2.8 0.5

-4.9 2.4 -0.8 30.7 34.4 40.1

7.6 8.1 8.5 59.0 79.0 71.3 23.2 19.8 28.1

5.9 5.1 18.4 12.1 44.1 29.1 28.6 11.: 10.5 86.3

6.1 6.: 9.9 6.1

70.1 65.' 22.2 20.'

0.3 3.1

-3.4 -3.4 51.2 55.

61.1 48. 35.2 32.

13.2 9.8

G N P ( T L quadrillion) 78.3 125.6 176.5 275.0 356.7 415. I/ IMF, includes government securities issued to recapitalize SDIF and state banks. 2/ Government figures as adjusted by I M F and W B estimates. 2002 and 2003 G S P figures are as announced by S I S in A p r i l 2004. 31 Updated as o f t h e 7th I M F review. 4/ Average o f monthly nominal interest rate divided b y 12-month ahead C P I inf lat ion. 5 / Includes shuttle trade. Sources: Government, IM F and W B estimates.

Figure 11.5. Total Net Public Debt (YO of GNP)

I "^"- " I " ^ - ^

Cost o f rertructurmg 100

80

60

40

20

o f state banks

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 ~- ~- _ ~ -~

19

G. STRONG RECOVERY HAS BEEN UNDER WAY SINCE EARLY 2002

Economic activity rebounded strongly in 2002 and the recovery continued into 2003. Real GNP growth reached 7.9 percent in 2002, exceeding program projections by a wide margin (Figure 11.6). The recovery was led by robust export performance and exceptionally large inventory rebuilding in the f i rs t ha l f o f the year. The recovery was further buoyed by a sharp rise in public consumption and investment during the second semester, reflecting accelerated government spending ahead of early elections held in November 2002. An increase in agricultural output estimated at 6.9 percent was another factor. Overall, stock building accounted for some 90 percent o f 2002 growth, with private consumption and government spending making significant contributions to offset declines in private investment and net factor income. The impact o f strong export performance in the 2002 growth accounting was offset by even faster growth in imports as the recovery gained steam. Importantly, private consumption and investment led the way for the f irst t ime since the crisis, recording increases in 2003 o f 6.6 percent and 20.3 percent, respectively. Whi le stronger-than-expected growth has been due in part to base effects f rom the recession, the genuinely positive news i s that the recovery has been export led, with exports in US. dollar terms increasing by some 30 percent in 2003. Strong export performance, buoyant tourism, and renewed capital inflows have eased the pressure on the balance o f payments, even as imports have expanded rapidly with the economic recovery. The modest current account o f about 1 percent o f GNP in 2002 was easily financed. The extent of the recovery, and i t s basis in export growth, place Turkey squarely in the category o f rapid-recovery, post-crisis countries, such as Mexico in 1995 and Korea in 1999. Turkey's recovery began three quarters after the crisis trough was reached, in l ine with the fastest recoveries worldwide over the past decade.

Figure 11.6. GNP Growth

In contrast with the real-side recovery, financial outcomes were mixed in 2002. On the positive side, inflation fell sharply. Consumer prices increased 29.7 percent over the course o f 2002, wel l below the program target o f 35 percent. The fa l l in inflation was helped by the rebound o f the nominal exchange rate f rom i t s crisis lows. The strengthening TL did not hurt export performance because it was counterbalanced by a very sharp drop in real wages. More problematic were slippages in the fiscal program during the run up to the November elections. A gap o f about 2.5 percent of GNP emerged with respect to the 2002 primary surplus target o f 6.5 percent o f GNP. Contributing factors included: (a) cost overruns in the social security system; (b) pre-election spending (new agriculture support purchases and

20

c i v i l service wage increases); (c) an unexpected drop-off in tax revenues, driven by expectations o f a post-election tax amnesty; and (d) unplanned spending through earmarked accounts lef t over fo l lowing closure o f the extrabudgetary funds. A series o f stopgap fiscal measures were identified in late 2002 to close the fiscal gap, but were left largely unimplemented. Despite the fiscal slippage, the stock o f net public debt fe l l t o an estimated 80 percent o f GNP by the end o f 2002, helped by the rebound in the real exchange rate after the 2001 overshooting* and higher-than-expected growth.

The new Govemment's grace period with the financial markets was short l ived as concems about a slow start on economic reform, hints o f political tension, and the looming threat o f hostilities in neighboring I raq started to weaken investor confidence in mid-December. Ad hoc increases in pensions in early January and other populist measures raised concems about the Govemment's political wil l to implement tough economic reforms. The average yield o f the benchmark government paper moved up to the 60 percent range, and the L i ra came under some pressure. Financial market volati l i ty continued during the f irst quarter o f 2003. However, the winding down o f hostilities in Iraq and approval by the U.S. Congress in early April o f a scaled-down assistance package for Turkey (a grant equivalent o f US$l billion, potentially convertible to up to US$8.5 b i l l ion in loans) eased some o f the market tension once again.

H. MACROECONOMIC OUTCOMES IN 2003 WERE FAVORABLE

The Turkish economy continues to grow at a fast pace. Economic growth reached 5.9 percent in 2003 fol lowing 7.9 percent growth in 2002. The major contributing factor to the favorable growth outcome in 2003, because o f i t s weight in the national accounts, was private consumption growth. However, showing much faster rates o f growth was private sector capital formation. This augurs wel l for sustaining growth, with capacity utilization levels reaching historic highs. Exports continued to play an important role in the recovery. The current account deficit widened to almost 3 percent o f GNP, but was easily financed by short-term capital inflows, public sector borrowing abroad, and reverse currency substitution. Inflation fe l l to 18.4 percent in 2003, and the latest data suggest that inflation i s fall ing toward the important single- digit level for the f i rs t time since the 1970s.

Employment declined in 2003 following public and private sector restructuring, which, together with three years of decline in real wages, helped preserve competitiveness in spite o f strong currency appreciation. Aggregate unemployment remained stable at around 10 percent, but this was helped by a temporary s h n k a g e in the labor force. In urban areas, the unemployment rate approached 15 percent, and unemployment o f educated youth rose above 30 percent at the end o f 2003. With a trend increase in the labor force o f at least 1.8 percent per year, further reforms are needed to strengthen j o b creation.

I. TURKEY HAS ACHIEVED SIZABLE FISCAL ADJUSTMENT

Strong fiscal performance has been the comerstone o f the economic program. Fiscal gains were significant in 2003, and the primary surplus rose f rom 4 percent o f GNP in 2002 to over 6 percent o f GNP in 2003, close to the programmed 6.5 percent target. Nevertheless, the overall fiscal deficit remained considerable at 9.9 percent o f GNP. Although the 2004 budget passed in December was consistent with the 6.5 percent primary surplus target, a sizable fiscal gap quickly emerged. The Govemment announced above-inflation increases in minimum wages, and cut contribution rates for social security to reduce the additional costs to employers. In addition, the Govemment increased pensions by 21 percent, wel l above the inflation target. These initiatives, together with revenue shortfalls relative to the budget, created a

" A 10 percent move in the real exchange rate causes a 4 to 5 percentage point adjustment in the public debt-to- GNP ratio. The real exchange rate path i s given in Table 11.1,

21

financing gap o f close to 1.7 percent o f GNP. The Government introduced a fiscal package in March to close the fiscal gap. This package has two main components: a supplementary budget and revenue measures. The supplementary budget passed in March cuts discretionary expenditures by 13 percent across a l l ministries. The Government also introduced measures to increase tax revenues by adjusting excises o n petroleum, alcohol, tobacco, and natural gas. Whi le the Government has demonstrated a willingness to undertake action to meet the fiscal target, good public expenditure management and delivery o f services to citizens will require less reliance o n ad hoc, short-term measures, and a focus o n sustainable fiscal adjustment.

Monetary pol icy followed a policy of implicit inflation targeting, with the Central Bank occasionally intervening in the foreign exchange market t o dampen what was deemed to be excessive fluctuation in the exchange rate. The decline in inflation, which was aided by the strength o f the TL, led to a commensurate decline in interest rates f rom a nominal 60 percent in the f i rs t quarter o f 2003, to about 25 percent early in 2004.

On the external front, despite appreciation o f the TL, rising productivity and declining labor costs helped sustain external competitiveness and export growth. Exports grew sharply in 2003. Texti le and vehicle exports were best-performing sectors. One encouraging sign i s the growing importance o f new export markets. I raq has already become a large export market for Turkey, and there was strong growth in exports to China, Russia, and Central and Eastern European countries. Imports also grew rapidly, with oil, increased imports o f machinery and equipment, and rising demand for imported consumption goods being major contributors. Intermediate and capital goods accounted for 86 percent of the increase in imports during 2002 and 2003. Consumption goods also rose sharply in the second h a l f o f 2003, and continued in early 2004. M u c h o f the increase in consumption goods imports was driven by automobile imports, which benefited f rom a temporary tax credit o n automobile purchases introduced in August 2003. Tourism receipts were maintained in 2003 despite the Istanbul bombings and uncertainty caused by the Iraq war. The current account deficit increased to 3 percent o f GNP in 2003. Continued market confidence has spurred an improvement in capital inflows, although green field investment has remained low. These inflows easily financed the current account deficit and allowed the sharp increase in international foreign exchange reserves to US$33 billion, equivalent to 5 months o f goods and services imports.

The combination o f strong real and financial market performance had a favorable impact o n the public debt burden. The net public debt-to-GNP ratio fe l l sharply during 2002-2003 from i t s end-2001 peak o f 93.9 percent o f GNP. Helped by declining real interest rates, strong fiscal performance, the recovery of economic growth and, above all, by the continued appreciation o f the real exchange rate, Turkey’s net public sector debt i s estimated to have fallen to about 70 percent o f GNP at end-2003. The decline would have been larger without the issuance o f new debt (o f TL 6.8 quadrillion) for the takeover o f the fail ing Imar Bank in July 2003. With capital f lows increasing, and a growing appetite for Turkish Government paper, the Treasury had n o problem servicing the debt. Nevertheless, the high rollover rate, 88 percent in 2003, indicates the continued dependence on market sentiment, and thus vulnerability to external developments.

J. DETERIORATION IN EXTERNAL BALANCE HAS CREATED VOLATILITY IN DOMESTIC FINANCIAL INDICATORS

The deterioration in global financial indicators in early M a y 2004, combined with the higher-than- expected current account deficit figures, has l ed to a sharp weakening in domestic financial indicators. Whi le the TL depreciated about 14 percent, taking i t to i t s late-2002 level, the stock market plunged by 18 percent, although from an all-time-high level, and the benchmark Treasury bond rate reached a high o f 30

22

percent by mid-May from 22 percent in early April. Turkey’s Eurobond spreads widened by over 200 basis points to 525 basis points during the same period. The excess volati l i ty in the foreign exchange market was curbed to some degree by the Central Bank’s intervention. It appears that some relative stability has been achieved in domestic financial markets. These recent developments have underlined Turkey’s exposure to shocks f rom the external environment. Whi le the depreciation o f the TL i s an adjusting factor to the deteriorating current account balance, it i s also l ikely to affect inflationary expectations and domestic interest rates. Higher domestic interest rates, together with the impact o f the TL’s depreciation, would influence the overall fiscal deficit and economic activity. Spillover f rom global liquidity tightening, and rising spreads, are l ikely to increase the cost of external borrowing. Such developments, if persistent, could disrupt the virtuous cycle that the economy has experienced over the last year and a half.

K. ONGOING STRUCTURAL REFORMS ARE EXPECTED To STIMULATE GROWTH

In response to market pressures, the Govemment has shown a renewed commitment to program implementation. Sustaining the momentum o f the ongoing recovery and the confidence o f markets continues to be the challenge facing policymakers. Under stable domestic and international conditions, Turkey could repeat or improve o n last year’s macroeconomic performance in 2004. Growth should again meet the 5 percent target. Inflation i s already running below projections. Carryover f rom the strong increase in industrial output in 2003, and a more normal harvest in the agriculture sector in 2004, should deliver the growth target f rom the production side. On the demand side, confidence indicators are strengthening, and lower interest rates and easier credit are providing stimuli to private investment and consumption. Despite firm domestic demand, there are strong prospects of meeting the inflation target o f 12 percent, which would outperform targets for the third year in succession.

Medium-term projections demonstrate that sustained implementation o f economic reform i s necessary i f Turkey i s to attain i t s macroeconomic stability and growth objectives. Under the structural reform program, the economy i s expected to grow about 5 percent during 2005-2006. Specific factors underlying stability and sustained growth include: (a) greater confidence in the pol icy framework; (b) improved macroeconomic stability and declining real interest rates-which would stimulate private investment and consumption demand; (c) an increase in productivity resulting f rom structural reforms; (d) stronger exports performance-which would permit faster import and output growth; and (e) higher external inflows, including sizable foreign direct investment. Under the sustained reform scenario, fiscal adjustment will y ie ld a permanent reduction in the public sector borrowing requirement f rom about 10 percent o f GNP in 2003 to 5 percent o f GNP in 2006.

23

CHAPTER 111: POVERTY PROFILE

9

1 o+ Total

In 2002, 27 percent o f the Turkish population was poor, as determined by the complete poverty l ine methodology detailed in Annex One. This poverty profile i s based on that definition o f poverty. Poverty in Turkey i s strongly associated with age and household composition, where children and families with children are poorer than average. This association i s robust with equivalence taken into consideration (Ravallion and Lanjouw 1995), because the main poverty line i s one with the adjusted equivalence scale (see Annex I). Other correlates o f poverty are standard, but s t i l l important-rural location, unemployed household head, female-headed households. Poverty and labor force variables are also interrelated (see chapter on labor). The 2002 Household Budget Survey (HBS) also captured many correlates o f the well off, including the ownership o f many assets and consumer durables and many housing attributes.

47.5 52.5 3.1 2,100,168 3.1

55.9 44.1 5.8 4,022,830 5.9

27.0 73.0 100.0 68,393,031 100.0

A. HOUSEHOLD SIZE AND COMPOSITION

Poverty increases somewhat monotonically with additional household members (Table 111.1 , Figure 111. l), starting at three members. There i s a small “blip” whereby households comprised o f one member or two members are slightly poorer than those with three, but there are few such households in Turkey-only 1 percent o f the sample population i s a single-person household, and 8 percent are two-person households. Those households are primarily composed o f elderly, who face a poverty risk higher than average, but st i l l lower than that o f children.

Table 111.1. Turkey: Poverty and Household Size

24

Figure 111.1. Turkey: Poverty and Household Size

* The percent o f those who answered the question or for whom we have data. Notes: Poverty in percentages. Population Subtotals: Weighted number o f observations. Source: DIE 2002 HBS.

1 2 3 4 5 6 7 8 9 1 0 +

Household Size

Larger households are poorer than smaller households, and this result i s driven pr imari ly by the fact that additional household members are more l ikely to be children, which have a higher poverty rate. This conclusion i s demonstrated by a number o f cross-tabulations (poverty and the number o f children, the number o f elderly, poverty by household composition, and poverty by age, which are presented in Tables 111.2, III.3, 111.4, and 111.5 and Figures 111.2, 111.3, 111.4, and 111.5, respectively). Households with n o children or only one chi ld had poverty rates sharply below the average, whereas households with three or more children had poverty rates above or substantially above average (Table 111.2, Figure 111.2). The modal household i s one o f two parents and two children, and was used in the poverty l ine methodology- households with two children have a poverty rate slightly below average.

Table III.2. Turkey: Poverty and Number of Children in Household

25

Figure 111.2. Turkey: Poverty and Number o f Children

45-49 50-54 55-59 60-64 65+ Subtotal

0 1 2 3 4 5 6+ I

I Household Size

2,035,002 1,978,808 3.0 2.9 1,571,553 1,786,466 2.3 2.6

495,889 1,8 10,571 0.7 2.6 401,241 1,615,043 0.6 2.4

1,280,363 3,533,030 1.9 5.2 33,307,408 35,085,627 48.7 51.3

Poor +Total Poor

Given the population structure o f Turkey (Table II1.3), it i s not surprising that many fewer households have elderly members (about a quarter) than those with children (79 percent). There i s a correlation between having elderly members and household poverty, but this correlation i s not as marked as with having additional children, and far fewer households have elderly members (Table 111.4, Figure 111.3). Having one elderly member did not appreciably increase the risk o f poverty, and having two or more slightly increased the risk o f poverty, but not as much as having three or more children.

Table 111.3. Turkey: Age Structure of HBS and Census

26

Number of Elderly in Household

0 1

Percent of Population Poor Non-Poor Valid* Subtotals Percent of Total 25.9 74.1 73.7 50,394,138 73.7 28.0 72.0 17.1 11,684,961 17.1

* The percent o f those who answered the question or for whom we have data. Notes: Poverty in percentages. Population Subtotals: Weighted number o f observations. Source: DIE 2002 HBS.

2+ Total

Figure 111.3. Turkey: Poverty and Number of Elderly

33.7 66.3 9.2 6,3 13,935 9.2 27.0 73.0 100.0 68,393,034 100.0

40.0

35.0

30.0 - 25.0 E ; 20.0

2 15.0

10.0

5.0

0.0 0 1 2+

__II__~ __llll.__.-lll._l

--

- 3

I --

-

--

I -

-

I

Poor --t Total Poor I I

The finding that having children increases poverty risk more than having elderly members i s also demonstrated by looking at the data in terms o f family composition (Table 111.5): whether a family has children, elderly, both, or neither. The latter type o f family i s unusual in Turkey-only about 12 percent o f the population lives in such households, while 66 percent o f households have children but n o elderly, and only 4 percent have elderly members but n o children. Households with n o dependents are rarely poor (only a 12 percent poverty rate), whi le households with both children and elderly are the poorest (38 percent are poor), although there are relatively few such households (under one-fifth). The majority o f the poor i s comprised o f families with children (Figure 111.4).

27

Households with N o Elderly and No Children No children, no elderly Children. no elderlv

Percent Population Percent of Poor Non-Poor of Valid* Subtotals Total 11.9 88.1 12.3 7,915,326 11.6 28.5 71.5 65.7 42.478.812 62.1

Figure 111.4. Turkey: Share of Poor in Percent by Household Consumption

Elderly, no children 18.2 81.8 4.4 2,865,057 4.2 Both children and elderly 37.6 62.4 17.6 11,345,848 16.6 Total 27.0 73.0 100.0 68,393,033 100.0 * The percent o f those who answered the question or for whom we have data. Notes: Poverty in percentages. Population Subtotals: Weighted number of observations. Source: DIE 2002 HBS.

5.3

2.9

No Children, No Bderly Children, No Bderly

0 Elderly, No Children [3 Both Children & Bderly

In Turkey, poverty i s strongly associated with age-younger children are poorer, and active-aged adults are not as poor, and the elderly are poorer than adults, but not as poor as children (Table 111.6, Figure 111.5), except for a peak in the age range 30 to 34, which i s the prime age bracket for adults to have children .

Table III.6. Turkey: Poverty Rate of Age

28

Age 45-49 50-54 55-59

Poor Non-Poor Percent o f Valid* Population Subtotals Percent o f Total 20.5 79.5 5.9 4,013,810 5.9 18.1 81.9 4.9 3,358,019 4.9 21.5 78.5 3.4 2,306,460 3.4

Figure 111.5. Turkey: Poverty Rate and Age

60-64 65+ Total

40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0

19.9 80.1 2.9 2,016,284 2.9 26.6 73.4 7.0 4,813,393 7.0 27.0 73.0 100.0 68,393,035 100.0

+Poor i l-Total Poor

B. HOUSEHOLD HEAD CHARACTERISTICS

The household head has an enormous impact o n the poverty status o f her or his household, through the employmenthnactivity nexus and the amount o f income she or he can contribute to the household. Employment and labor market variables are covered in the chapter o n labor (but it bears mentioning that the poverty rate for unemployed heads was 35.4 percent compared with total (average) poverty o f 27 percent), while education i s treated below. Other household demographic characteristics that are associated with poverty include whether the household i s female headed (Figure 111.6), with a poverty r isk o f 32 percent, compared to a male-headed poverty rate o f 26.6 percent. However, few Turhsh households are headed by w o m e n - o n l y 6.5 percent o f the sample population lives in a female-headed household.

29

Figure 111.6. Turkey: Poverty and Gender of Head

30

20 Z 15

10

c 25

n

5 - 0 .

- I - i =Poor

i +Total Poor _ _ 1 -

- I

!

I

1

1

Male Female

The education o f household head i s an even more significant influence o n household poverty than gender or unemployment for the illiterate and those who did not receive a primary school diploma (Figure 111.7), with relative r i s k premia o f nearly 100 percent (meaning that the rate o f poverty o f these kinds o f households i s twice the national average o f 27 percent).12 Additionally, nearly 9 percent and more than 7 percent o f the sample population l ive in households with illiterate or no-diploma heads, respectively. At the opposite end o f the spectrum, n o households with heads with masters or doctorates were poor-but less than 1 percent o f the sample population lives in such households, and only 1 percent o f households headed by someone with four years o f university education was poor. Even finishing high school or vocational education was a bulwark against poverty-households with these sorts of heads were only 9 percent and 8 percent poor, respectively.

Figure 111.7. Turkey: Poverty and Education of Household Head

Poor

+Total Poor

'' Turkey recently changed the length o f mandatory education f r o m 5 to 8 years, so very few household heads have completed 8 years, because this would make these heads quite young.

30

C. SPATIAL CHARACTERISTICS

The 2002 H B S sample was not designed to be regionally representative o f Turkey’s seven regions, and therefore n o cross-tabulations are presented on the regional level. The 2003 survey, which was recently completed, was designed to be regionally representative. When the 2003 data are cleaned and available, DIE and the World Bank intend to complete a Poverty Update that wil l quantify the regional dimensions o f poverty. In the meantime, a l l indicators, quantitative and qualitative and the 1994 findings, indicate that spatial dimensions o f poverty are highly significant, with Eastem and Southeastem Anatolia being much poorer than other regions of Turkey, and Marmara being the best-off area. These two areas are also the least urbanized in Turkey, and the 2002 data are representative for rural and urban differences, which are discussed below.

There i s a sharp difference in the poverty rates between rural and urban households, with a poverty rate o f nearly 35 percent for the rural population, but only 22 percent for the urban population (Figure 111.8), while most people l ive in urban areas (three-fifths o f the sample population).

Figure 111.8. Turkey: Poverty and Location

~ 40.0

I 35.0 30.0

E 25.0

~ 2 15.0 10.0 5.0 0.0

,

al 1 2 20.0

I

Rural Urban ,

The drivers for the predominance o f rural poverty are the same as for poverty overall-household composition where larger families with more children predominate in rural areas, l imi ted employment opportunities (agriculture predominates in rural areas and i s the sector with elevated poverty r isk, with 70 percent o f the rural employed working in ascul ture), and the influence o f education. Mean household size in rural areas i s 4.30 members, whereas in urban areas it i s 4.07. In both urban and rural areas, household size i s larger for poor than for non-poor families, but the gap i s larger in urban areas (Figure 111.9).

31

Figure 111.9. Turkey: Household Size and Location

Total

Non-Fbor

Fbor

I Lkban Wral

0 1 2 3 4 5 6 7 I

I Number of Members I

Rural areas are characterized by limited employment opportunities, and rural households where the head i s unemployed face a substantial r isk o f poverty-65 percent o f them are poor. Numerically, however, few households in rural areas have unemployed heads -on ly 5 percent o f the rural population lives in such households (10 percent o f the urban population have unemployed heads, but their poverty rate i s only 26 percent).

Other kinds o f inactivity have different implications in rural and urban areas. For example, heads who gave their reason for not working as elderly (over 60) were 55 percent poor in rural areas, but only 34 percent were poor in urban areas (comprising 4.3 and 2.7 percent o f the rural and urban populations, respectively). Housewives were 47 percent poor in rural areas compared to 32 percent poor in urban areas (1.2 and 3.8 percent o f the respective populations). The only kind o f inactivity for representative numbers o f households that had similar poverty rates in rural and urban areas was when the household heads reported their inactivity was due to retirement-1 3 percent poor in rural areas and 1 1 percent poor in urban areas. However, far fewer household heads were retired in rural areas (only 6 percent o f the population) compared to 14.5 percent o f the urban population.

The major driver for rural and urban employment findings appears to be sector o f employment, where rural location i s dominated by agriculture (Figure 111. lo), which offers few o f the more lucrative formal employment options found in urban areas (Figure 111.1 1). As demonstrated in the chapter o n labor, poverty rates for those employed in agnculture are sharply above those for other, urban sectors. In 2001, the Government introduced a Direct Income Support (DIS) program for agriculture, which involved a payment o f about US$90 per hectare to farmers in compensation for the removal o f agricultural subsidies. DIS was estimated to cover about ha l f the income loss to farmers in 2002 for the removal o f subsidies (World Bank, 2004). The HBS did not include any questions about the DIS, so further quantification in this report based on the H B S i s not possible.

Interestingly, about 10 percent o f the employed urban population i s active in agriculture, so this sector i s predominately but not exclusively rural. For example, 8 percent o f urban households report that they produce vegetables and livestock for their own consumption, and these households are much poorer (32 percent) than those that do not (21 percent poor). In rural areas, 69 percent of households produce their own food, but the differences in poverty rates among those that do (36 percent poor) and those that do not (3 1 percent poor) are not as pronounced as for urban households.

32

Figure 111.10. Rural Employment by Sector

Agriculture, huntinq, and

I Manufacturing

I3 Construction

I Wholesale and retail trade

9.1 W Remainder

Figure 111.11. Urban Employment by Sector

I 9.7

- 22.3

__ Agriculture, hunting, and forestry Manufacturing I

0 Construction

' El Wholesale and retail

I Remainder

I

trade

Education appears to have identical effects in both urban and rural settings, whereby those who are illiterate or l imited to primary school have sharply higher poverty rates than average, and higher education graduates are much less l ike ly to be poor (Figure 111.12). In both areas, poverty rates steadily decrease as years o f education increase, and always, at every education level, the poverty r isk premium o f rural location persists until the very highest levels for which there are essentially n o observations in rural areas.

33

Figure 111.12. Rural Employment by Sector

50 0

45 0

40 0

35 0

u 300 c Q 2 250 Q n Z O O

15 0

10 0

5 0

0 0

_. ,+Rural P w r p u r a 1 Total

Urban Pwr "mwU*an Total

--

Nonmaterial aspects of poverty also conf i rm that poverty i s more pervasive in rural areas. In terms o f quality o f diet, the rural poor consume more bread (8.37 units) and therefore less higher-calorie items per week than the urban poor (7.59).

D. NON-INCOME ASPECTS OF POVERTY

Poverty restricts the poor f rom accessing many goods and services. The 2002 HBS collected some information on these other aspects o f poverty, which show the typical pattern o f much lower participation o f the poor in the activity, good, or service profiled. Alternatively, there i s information o n assets that uniformly shows that assets are distributed to the non-poor, which, o f course, i s t o be expected since the poor lack the resources necessary to amass assets. This section details the "non-income" aspects o f poverty, whereby non-income i s understood to be shorthand for material items, assets, or services that are ultimately obtained through income.

Dwel l ing place i s typically the most important household asset, followed by land in rural areas and automobiles. In Turkey, fo l lowing o n f rom the spatial differences, there i s a pronounced difference in the kind o f dwelling. About ha l f the sample population lives in a house, and another 27 percent lives in apartments. However, whi le individual houses are primarily in rural areas, they are also s t i l l prevalent in urban areas-particularly in gecekondu (slum) areas. However, apartments are almost exclusively an urban phenomenon, and one that pertains to the non-poor. Only 6.5 percent o f apartment dwellers are poor (Figure 111.13), whi le 36 percent o f those who l ive in houses are poor (this corresponds to the overall total rural poverty rate). The urban poor are clustered in the gecekondu areas-the poverty rate o f those who report that they l ive in a gecekondu house i s 35 percent. Vir tual ly a l l gecekondu dwellings are houses.

34

Figure 111.13. Turkey: Poverty and Dwelling

40

35

30

25 E

g 20 2 15

10

5

0 ’

- __ I _ _ ______l____l___ - ___ . _ _ -

-

-- +

--

-

- --

I

Poor --t Total Poverty

45 40 35

$ 30

~ Apartment House

--!

!

I - I

--

-

, - -

e I -Poor -

J

2 20 15 10 5 -

Other housing-related indicators reflect similar findings on the spatial distribution o f the poor, and particularly on the urban poor being located in gecekondu areas. For example, 7.7 percent o f the sample population reported that they had central heating (an urban attribute), but only 2 percent o f these were poor. However, the 86 percent o f the population that reported their heating source was a stove had a poverty risk o f 3 1 percent, which i s more than the total poverty rate o f 27 percent. Electricity i s virtually universal in Turkey; only 0.1 percent o f the sample population reported that they lived without it-but all o f these were poor (too few observations for reliable inference).

- I I -

-

Only 4 percent o f those surveyed reported that they owned an additional home, apartment, or summer resort, or that their home was a “luxury” one, but o f these, very few were poor, with average poverty rates in the single digits. Conversely, the use o f dung for heating was strongly correlated with poverty (Figure 111.14).

Figure 111.14. Turkey: Poverty and Use o f Dung

No Yes

35

Land i s an important asset in Turkey, particularly for the poor. Twenty-seven percent o f the sample population reported that they had a field, but these households were poorer than average, with a poverty rate o f 34 percent. The mean size o f the fields for poor households was 75 percent the size o f the non- poor fields.

Water heater Aspirator

More than one-fifth (23 percent) o f the sample population reported owning a car, but only 6 percent o f these were poor. Other consumer durables showed similar results.

11.9 88.1 49.1 33,594,478 49.1 5.5 94.5 22.7 15,535,335 22.7

Table 111.7. Turkey: Poverty Rate of Consumer Durables

The poor are less able to afford discretionary expenditures-the poverty rates o f those reporting that someone in the household smokes, drinks, takes course in computers or foreign language or driving, attends nursery schoolkindergarten, takes public transportation to school, dines out, reads newspapers, goes to moviedtheatre, habituates cafes, plays the lottery, or takes medication regularly are all lower, and often substantially lower, than the overall poverty rate o f 27 percent (Figure 111.15). However, the participation in each o f these activities vanes greatly, from a high o f 67 percent o f the sample population reporting that someone smokes, to a low of 1.6 percent for nursery schoolkindergarten participation. Fifteen percent o f households reported use o f public transportation, but more non-poor than poor accessed this-the poverty rate for usage was 17 percent compared to the total poverty rate o f 27 percent.

36

Figure 111.15. Turkey: Poverty and Discretionary Activities

40

35

30

c 25

2 20 0)

n. 15

10

C Q)

5 -

0 -

Shopping patterns vary between the poor and the non-poor because the latter are more l ikely to shop at markets or bazaars. The poverty rate o f those who do not shop at markets or bazaars i s higher than average (Figure III.16), whi le very few poor have access to a credit c a r d - o n l y 2 1 percent o f households reported using a credit card, but o f those, the poverty rate was only 5 percent.

! -- "_- - ~ . I I-----

--

-

4 A 7

-- - -Poor -

I +Total Poor I

.-

I

Figure 111.16. Turkey: Poverty and Shopping

Market- Market--no Bazaar- Bazaar-no i Yes Yes

E. INEQUALITY AND REGIONAL DIFFERENCES

Turkey i s a high-inequality country, and i ts inequality has not improved since 1994 (Table 111.8). Inequality, as measured by consumption from the HBS, does not change much once the same standards in constructing the consumption aggregate and equivalence scales are applied to the 2002 data, as were used by the World Bank with the 1994 data (see Annex I).

37

Table 111.8. Comparable Inequality ~

1994 2002 Change, Times Inequality, Gini for 1994 consumption per 0.385 0.390 1.01

Inequality, Gini for 1994 consumption per 0.408 0.413 1.01 equiv. adult*

~~ * 1994 equivalence scale (nutrition based)

However, in this report, a new methodology for consumption was used, which excluded some o f the variation in consumption o f the o ld methodology in terms o f handling o f consumer durables (Table 111.9). The new methodology shows n o change in income inequality, but a lower level o f consumption inequality. This lower level o f consumption inequality i s not due to any improvement in the distribution, but i s simply the result o f the new methodology.

Table 111.9. New Methodology Inequality Measures

Both indexes indicate that inequality i s higher in urban areas than in rural areas, but not by much. As i s typical, inequality based on income i s greater than that based on consumption.

Turkey i s a middle-income country, and i t s inequality i s high. The worst inequality i s in the poorest countries (Milanovic, 200 l), the middle-income countries have medium levels o f inequality (but Turkey i s relatively high), and the lowest inequality i s among the best-off countries (except for the outlier of the United States, with high income inequality).

In previous Wor ld Bank research and the Turkish literature, the major driver for Turkey’s high level o f inequality i s regional differences, with urban-rural differences playing a secondary role. Eastern and Southeastem Anatolia are markedly poorer than the rest o f the country. This has been the case for Turkey for a very long time, and certainly as documented during the past 30 years.

This finding i s corroborated by every major study o n poverty in Turkey, including the Government’s latest Preliminary National Development Plan (2003), studies undertaken by the Bank in its previous Poverty Assessment and Poverty Update (World Bank, 2000, 2003), the Uni ted Nations Development Programme in i ts “Human Development Reports,” the Turkish academic literature (for example, Ogut and Barbaros undated), reports f rom the State Planning Organization, and numerous qualitative assessments undertaken for Wor ld Bank projects in Turkey over the past decade.

The Government’s most recent study, the Preliminary National Development Plan (2003) provided several figures-Figures 111.17 through 111.19-ranking Turkey’s regions on a variety o f indicators, including GDP per capita and other social and human development indicators. In a l l these, much greater poverty in Eastern and Southeastern Anatolia i s demonstrated. Table 111.10, on per capita GDP, ranks the 26 regions o f Turkey f rom highest to lowest, and Table 111.11 provides social and human development

38

indicators by region. Note that in Figure 111.18, the index o f socio-economic development used i s lowest for the best-off regions and highest for the worst-off.

Statistical Regions

Turkey

Table 111.10. Per Capita Gross Domestic Product, by Statistical Regions, 2001*

US% 2,146.00

Source: DIE. *At Current Prices - Ranked in Descending Order

39

Table III.ll. Turkey: Social and Human Development Indicators 1997 ~

Under-weight Adult Life Expectancy Children Literacy at Birth (years) Under 5 (YO) Rate (YO)

Marmara Aegean Black Sea Central Anatolia

71.59 6.20 89.29 71.53 7.25 85.16 67.22 9.29 81.45 65.52 10.54 84.60

IMediterranean I 66.63 I 11.29 I 84.28 I Southeastem Anatolia Eastem Anatolia

65.89 17.00 62.34 62.05 19.00 70.99

Turkey

F. MULTIVARIATE ANALYSIS

68.90 10.00 83.20

The multivariate analysis confirms almost a l l o f the findings o f the bivariate analysis presented above in poverty cross-tabulations. A probit analysis demonstrates that the probability o f the household's being poor i s correlated with household demographics, employment status o f the head, education o f the head, and location. In Table 111.10, coefficients with negative signs decrease the probabil ity of the household being poor, and coefficients with positive signs increase the chance o f the household being poor. The coefficients themselves represent the percent change in poverty likelihood. For example, rural location increases the chance that the household i s poor by 9 percent, controlling for the other factors.

Table 111.12. Probit Estimates

Log l i k e l i h o o d = -4041.3858

Number o f obs = 3 , 5 5 5 LR c h i 2 ( 1 5 ) = 1 8 2 1 . 6 6 Prob > c h i 2 = 0 . 0 0 0 0 Pseudo R2 = 0 .1839

. . ..._........__________________________~-~--~~.~~--~~-~.~----~~~~~~~~~-~..~..

POcPla I dP/dx S t d . E r r . z P > l z / x-bar I 95% C . I . 1

hunemp*/ , 0 6 8 2 2 1 . 0169959 4 . 3 7 0 . 0 0 0 ,083203 . 0 3 4 3 1 ,101532 dh ighe r * / - .1346925 ,0125338 - 6 . 5 3 0 . 0 0 0 ,090215 - . 1 5 3 2 5 8 - . 1 1 0 1 2 7 dp r imar * / ,0938267 . 0 0 8 9 3 3 1 3 . 8 2 0 . 0 0 0 ,640502 , 0 7 6 2 0 1 ,111453 dsocsec*/ - .1123116 .0086383 - 1 2 . 5 2 0 . 0 0 0 ,428362 - . 1 2 3 3 6 1 - . 0 9 5 2 6 2 dsec job* / - .0054283 .0131209 - 0 . 2 8 0 . 7 7 9 ,045107 - . 0 4 2 9 0 5 ,032047 e lder65 I ,0077759 ,0078997 0 . 9 8 0 . 3 2 5 ,223653 - .007707 ,023259

a d u l t 1 - .0250377 ,00369 - 6 . 7 8 0 . 0 0 0 2 .45313 - . 0 3 2 2 7 - . 0 1 7 8 0 5 c h i l d 1 ,0667864 ,0026853 25 .73 0 . 0 0 0 1 . 5 7 4 1 5 ,061523 .072049

unpaid* l ,0049726 .0158795 0 . 3 2 0 . 7 5 2 , 1 0 6 5 4 1 - . 0 2 6 1 5 1 ,036096 r u r a l * / ,096574 . 0 1 4 3 0 8 1 7 . 4 2 0 . 0 0 0 .153218 , 0 6 8 5 3 1 .124617

femalhd*/ - .0043401 .0133545 - 0 . 3 2 0 . 7 4 7 . l o 0 5 7 6 - . 0 3 0 5 1 4 ,021834 s e l f * / .012003 ,0111668 1 . 0 3 0 . 2 7 7 ,241444 - .009878 .033896

employer*/ - . l o 4 8 3 4 ,0134159 - 5 . 5 8 0.000 ,052747 - . 1 3 1 1 2 3 - .078539 casua l * / , 1 0 3 3 5 3 1 ,0168735 6 . 8 8 0 . 0 0 0 ,084458 .070282 .136425

temporar*i .0436523 ,0153984 2 . 9 0 0 .004 ,078074 ,012297 .075003

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

obs. P ~ , 2132915 pred. P 1 , 1648576 ( a t x - b a r ) ..............................................................................

( * ) dFjdx i s f o r d i s c r e t e change o f dummy v a r i a b l e f rom 0 t o 1 z and P > / z i a r e t h e t e s t o f t h e u n d e r l y i n g c o e f f i c i e n t be ing 0

40

The greatest impact o n reducing the probability o f poverty i s when the head o f household has higher education (reduces poverty by 13 percent), followed by whether the head has social security (in other words, i s formally employed), which reduces the chance o f poverty by 11 percent. The role o f formal employment i s also demonstrated in the series o f dummy variables relating to employment status o f the head (whereby permanent employment i s the omitted variable) because casual or temporary worker status increases the probabil ity o f the household being poor, but the category of employer reduces the risk o f poverty by 10 percent.

Factors that increase the probability o f poverty, other than rural location, include the number o f children in the family (each additional chi ld increases the chance of poverty by nearly 7 percent). The coefficient estimates for four variables were not statistically significant (elderly, self-employed, female-headed households, and unpaid family members), probably because they are relatively few in number.

Figure 111.17. Per Capita GDP Index

Nomenclature of S t a t l s t l c a l Terr i tor ial Unltsl l Regions

___-___ 0 1987-1989AW3'.AGES 1990- 1 9 9 4 A m G E S 0 1 9 9 5 2 0 0 0 A ~ G E S

Figure 111.18. Socioeconomic Development Levels (2003)

Nomenclature of Statistical Territorial Units II Regions

41

Figure 111.19. Female Literacy Rates (2000)

Nomenclature of Statistical Territorial Units II Regions

42

CHAPTER IV: EDUCATION

A. THE CONTEXT

In 1923, the year in which the Republic o f Turkey was founded, the adult literacy rate was approximately 10 percent. Such a low starting point in terms o f human capital (not uncommon for that era) i s certainly undesirable, but this allowed the founders o f the Republic to carry out major reforms that might otherwise have been more difficult to implement. Indeed, the key features o f the Turkish education system were established in the early years o f the Republic. The Tevhid-i Tedrisat law o f 1924 marked a move toward secular education, and in 1928, the Latin alphabet was adopted. In 1961, the duration o f primary schooling was increased from three years (in rural area schools) to five years.13

The idea of 8-year primary education first emerged in 1970, with the establishment o f a working group to formulate the specifics o f the proposed changes. This led to a 1973 law (1973 sayili M i l l i Egitim Temel Kanunu), which declared the duration o f basic education to be 8 years. In practice, however, the current structure o f the Turkish education system was established during the 1997-1998 school year, with the increase in compulsory schooling from 5 years to 8 years for children aged 6 to 14. Upon completion o f the 8-year primary school cycle, students may enroll in general or vocational secondary schools, which i s three years in duration. Tertiary schooling i s provided by universities.

A key implication o f the 1997-1998 education reform was the phasing out o f lower-secondary (general and vocational) schools that served grades 6 to 8. This reform was controversial, since both lower- secondary parts o f vocational schools that offered religious training and other lower-secondary schools had to be closed. The reform, however, also resulted in a renewed public and private commitment to the achievement o f universal enrollment levels in basic education. On the public side, extrabudgetary sources were channeled into education to cope with increased enrollments. Furthermore, sizable resources were obtained from the World Bank (through the June 25, 1998 Basic Education Program Loan and other projects that followed), the European Union, and other sources. On the private side, the “build a school” campaign enjoyed a boost, and several relatively large organizations emerged to collect donations with the objective o f supporting the schooling o f poor children.

Enrollment rates increased soon after the reform. During the 1995-1996 school year, the primary school enrollment rate was 89.8 percent; by the 1999-2000 school year it had grown to 97.6 percent. For secondary school, the enrollment rate increased from 55 percent to 59.4 percent during the same period. After the start o f the reform in the 1997-1998 school year, enrollments in primary schools increased from 9.1 mill ion students to over 10.3 mil l ion students in the 2001-2002 school year. A substantial school and classroom construction effort dominated this period, and the number o f classrooms increased from 210,905 to 280,257. Furthermore, over 70,000 new primary school teachers have been recruited since 1997.14 Other developments that took place in 2000s include equipment o f some schools with ICT and improvement o f the teachers’ competencies especially in the disadvantaged regions. A support campaing to increase the schooling o f girls i s also under implementation. For the 2001-2002 school year, the numbers o f schools, students, and teachers by education level and urbadrural residence are depicted in Table IV.~. ’~

l3 A detailed historical overview can b e found in Turkiye I s Bankasi (1999). l4 A comprehensive review o f the events and issues that characterized the Turkish education system in the 1990s until 2004 can be found in Dulger (2004). l5 Extracted f rom TC Milli E g i t i m Bakanligi (2001).

43

Table IV.1. N u m b e r o f Schools, Students, and Teachers in the 2001-2002 School Y e a r

Schooling Level

Public Schools

Number o f Schools

Total

Number of Students

Urban Rural Total Urban Rural Total Urban Rural

Number of Teachers

Pre- Primary

Primary

10,554 7,361 3,193 256,392 216,625 39,767 14,520 12,579 1,941

34,993 9,906 25,087 10,310,844 7,500,373 2,810,471 375,511 256,272 119,239

Total General Vocational

Secondary I I I I I I I I I 6,065 5,463 602 2,312,271 2,212,658 99,613 138,785 131,482 7,303 2,637 2,276 361 1,490,376 1,427,845 62,531 72,609 68,092 4,517 3,428 3,187 241 821,895 784,813 37,082 66,176 63,390 2,786

University 53 1,156,9 15 63,029

Schooling Level

Number of Schools

799 Pre- I

Number of Students Number of Teachers

18,152 1,822 Prima

~

642

Secondary

171,623 14,811

Total General Vocational

487 73,136 8,229 465 72,05 1 8,128 22 1,085 101

University t 23 55,022 3,721

The Turkish Government originally planned to increase compulsory schooling once again, from 8 to 12 years, fairly quickly. This policy proposal seems to be on hold, although i t i s very much a part o f the long-term agenda,16 and thus an improved understanding o f the implications o f the previous reform (of 1997-1 998) for the poor would provide guidance for further modifications to the compulsory schooling law. This report aims to do that by describing the positive developments in recent years. I t also identifies key problem areas that emerge as challenges to the schooling o f poor children. Finally, the findings of this study wi l l serve as inputs into the ongoing Turkey Education Sector Study titled, “Sustainable

See, for example, TC Milli Egit im Bakanligi (2001). 16

44

Pathways to an Equitable, Effective, and Efficient Education System,” which aims to build a technical foundation for pol icy analysis, and provide an open forum for a technically based dialogue in Turkey.

B. PUBLIC SPENDING ON EDUCATION

How Does Turkey Compare with Other Countries?

Turkey’s public spending o n education significantly increased after 1998, both in real terms and as a percentage o f gross domestic product (GDP) (Figure IV.1). However, even after such a dramatic increase, as o f year 2000, Turkey’s public spending o n education as a percent o f GDP was slightly less than (but comparable to) that o f lower-middle-income countries (the category into which Turkey falls) (Figure IV. l).”

Figure IV.l. Public Spending on Education as Percentage of Gross Domestic Product

2 - 1990 1991 1992 1993 1994 1995 1998 1999

Yea,

-e - Turkey t i o w i w o m s +Lauwmlddbiwome - - X - l J p ~ r m l d d l ~ i n s m s -Hgh i n 4 I

Source: World Development Indicators (WDI). Years 1996 and 1997 are not included since the WDI data set does not provide spending figures for those two years.

Distribution of Public Resources Across Different Levels of Schooling

In terms o f distribution o f public expenditure on education across different levels, the year 2000 figures f rom the Wor ld Bank’s EdStats data base suggest an emphasis o n primary schooling-about 49 percent o f public funds are allocated to primary schooling, where the public retums are high and from which the poor are most likely to benefit. The same source reveals that secondary schooling receives 20 percent of public expenditure and 3 1 percent goes to tertiary education. The low share o f spending o n the secondary level might signal a problem, and this i s a topic that wil l be examined in depth by the forthcoming Turkey Education Sector study which will focus o n spending trends in more recent years.

” The total spending o n education in Turkey i s estimated as 7.31 percent o f GDP, by the “Research on Turkey’s Spending on Education in 2002” report publ ished by the State Institute o f Statistics in 2003. The same document reveals that publ ic spending on education comprised o f 63.5 percent o f the total (i.e., 4.64 percent o f GDP in 2002).

45

Incidence ofpublic Spending on Education

1 (poorest)

The expansion o f compulsory schooling to 8 years had an extremely positive impact on the distribution o f public education spending across poor and r i ch households (Table IV.2). In 1994, only 15.8 percent o f public spending on basic education reached the poorest 20 percent o f households. In 2001, 21.7 percent of public spending on basic education reached the poorest 20 percent o f households, because the enrollment rates o f children coming from poor households increased substantially. Table IV.2 also shows that while some pro-poor redistribution occurred in the distribution o f public secondary education funding between 1994 and 2002, much remains to be done: only 13 percent o f public secondary school spending reached the poorest 20 percent o f population in 2001 (up from 8.7 percent in 1994).

2 3 4 5 (richest)

These estimates o f incidence o f public spending on education are obtained by imposing certain assumptions. One such assumption i s that the public schools attended by poor children, on average, receive the same amount o f funding as the public schools attended by wealthy students. If public schools with higher poor-student presence receive less funding on average, then this means the figures reported by Table IV.2 overestimate the amount o f resources that reach the poor. The figures for 1994 come from the education section o f the Turkey Public Expenditure and Institutional Review (World Bank, 2001), using student enrollment information from the 1994 Household Expenditures Survey, which does not identify enrollment status in private schools, and ascertaining level o f schooling currently attended has to be determined by certain assumptions (described fully in the Turkey Public Expenditure and Institutional Review). These limitations (that is, lack o f information on private school attendance and imprecise school enrollment information) do not apply to the reported 2001 figures, which are constructed using enrollment data from the 2001 Household Consumption and Income Survey (HCIS).

Basic education (8 years, primary + middle) Secondary education Total public expenditures

Table IV.2. Incidence of Public Spending on Education in 1994 (before the expansion o f compulsory schooling) and in 2001 (after the expansion o f compulsory schooling)

15.8% 21.1% 22.2% 20.6% 20.3% 8.7% 16.2% 22.3% 25.4% 27.5% 13.5% 19.5% 22.2% 22.2% 22.7%

Primary Secondary Tertiary

25.4 22.4 20.0 18.4 13.7 14.0 17.4 21.3 23.3 24.0 4.5 10.0 14.4 25.5 45.5

Basic education (8 years) Secondary education Total public expenditures

2 1.7% 2 1.4% 21.0% 22.0% 13.9% 13.0% 14.6% 25.4% 22.8% 24.2% 19.2% 19.4% 22.3% 22.2% 16.9%

database, and being categorized as a lower-middle-income country by the 2003 WDI. These are Ecuador, Guyana, Jamaica, Morocco, Peru, Romania, and South Africa. None of these countries, when considered alone, provides an adequate reference point when compared with Turkey. As a group, however, they provide some insights into the general circumstances in lower- middle-income countries.

46

In order to put the outcome o f the incidence analysis in context, the middle segment o f Table IV.2 reports average statistics for other lower-middle-income countries. Such a cross-country comparison suggests that prior to the expansion o f compulsory schooling, Turkey was at an extreme when it comes to distribution o f public resources in a way that benefited the wealthier households. After the implementation o f 8-year compulsory schooling, the distribution o f public funding became more in line with the experience o f other countries at about the same level o f economic development.

1994 znni

Incidence of Household Spending on Education

Household Income Quintiles

1 2 3 4 5 (poorest) (richest)

2.2% 7.1% 9.4% 18.0% 63.3% 6.2% 14.1% 16.6% 23.5% 39.6%

The distribution o f household expenditures on education i s even more unequal (Table IV.3). Only 2.2 percent o f total household expenditures on education was by poor households in 1994. After the expansion o f compulsory schooling, as more children from poor households started participating in basic education, the poor households had to spend more, and thus education expenditures’ share in total household spending increased to 6.2 percent. Regardless, household-level spending strongly reinforces the existing differences in the schooling environment experienced by poor children.

c. TRACES OF INEFFICIENT RESOURCE ALLOCATION IN THE EDUCATION SECTOR

A full discussion o f inefficiencies in the education sector i s beyond the scope o f this paper-this topic will be covered in detail by the ongoing education sector study titled, “Sustainable Pathways to an Equitable, Effective, and Efficient Education System.” Among the topics that are important but le f t out are ideal classroom size, teacher characteristics, teacher compensation, and school amenities. Also, in Turkey, there would be large payoffs to an elaborate evaluation o f the short-term and longer-term effectiveness o f information technology investments in schools to identify which groups benefit most from computer availability in schools, and under what conditions.

Classroom Size and Student-Per-Teacher Ratios in Primary, General, and Vocational Secondary Schools

In recent years, the number o f primary school students has increased significantly (Figure IV.2). The number o f students enrolled in general secondary schools increased slightly and enrollments in vocational secondary schools has remained about the same. In response to (and to enable) rising primary school enrollments, the number o f primary school classrooms increased sharply after 1998 (Figure IV.3).

47

Figure IV.2. Number of Students by School Type

12000000 ~

4000000

2000000 -B

I b

0 -~ 1997-1 998 1998-1 999 I9942000 2000-2001 2001-2002 2002-2003

School Year I +Primary -General high school -Vocational high school

Source. Ministry o f National Education Statistical Yearbooks.

Figure IV.3. Number of Classrooms Over Time -~ 300000 ___-

I

0 - 1997-1998

~- - -

1998-1 999 1999-2000 2000-2001 2001-2002 2002-2003

School Year ~

+Primary +General _hlSh school -*VocaJonal high s c h L K

Source Ministry o f National Education Statistical Yearbooks.

48

Starting with the positive development that the increase in the number o f classrooms at the primary cycle has been impressive in recent years, this has prevented increases in students per class at this level despite increased enrollments due to the expansion o f compulsory schooling. In fact, the number o f students per classroom at the primary level has declined from 43.2 in the 1997-1998 school year to 36.9 in the 2002- 2003 school year.

The cohorts affected the most by the expansion o f compulsory schooling are candidates for enrolling in secondary schools. The demand for general secondary schools has increased-enrollment rose from 1,094,610 in the 1998-1999 school year to 1,588,800 in the 2002-2003 school year (excluding “open” general secondary enrollments). As a result, average classroom size increased steadily after 1998, and peaked at 33 in the 2002-2003 school year. In contrast, average number o f students per classroom i s 27 for vocational secondary schools. Similarly, in vocational secondary schools the student-teacher ratio was only 14 in the 2002-2003 school year, compared to more than 20 for general secondary schools. As a result, Figures IV.4 and I V . 5 reveal misallocation o f scarce resources at the secondary level, but they also show very encouraging results at the primary level.

Figure IV.4. Number of Students P e r Classroom b y School Type

1997-1998 iwa 1999 19942030 2 m 2 0 0 1 2001-2002 2002-2003 SchW Year _ _ ~ ~

-Pnmaw -General hylh school svocatoonal high school

Source: Ministry o f National Education Statistical Yearbooks.

49

Figure IV.5. Student-Teacher Ratios in the 1997-1998 and 2002-2003 School Years

30

25

Q 20

; c

15 t - 2 10 0 U

5

1997-1998 2W2-2W3 School Year

’ OPrimaw mGT&fil high s c b l mvocatlona hlgh smoOl

Source: Ministry o f National Education Statistical Yearbooks.

In 2002, about 32 percent o f secondary school students were enrolled in vocational schools. The intention i s to increase the share o f vocational school students even more (TC Milli Egitim Bakanligi ZOOl), even though there are unresolved questions about the efficiency o f and demand for vocational secondary education.

D. DISTRIBUTIONAL AND EDUCATION-QUALITY IMPLICATIONS OF PUBLIC POLICIES ON EDUCATION

The question, “who suffers from inadequate public education funding?” i s not that meaningful, since a policy that has such large effects on economic growth affects everybody. An alternative approach would be to consider “who suffers from inadequate public education funding the most”? In the Turkish context, two leading contenders are (a) females, and (b) poor children. Despite a consistent decline in the percentage o f illiterate adults, as o f 2002, 22 percent o f female adults in Turkey were illiterate (down from 33 percent in 1990). For males, the percentage o f illiterate adults declined from 11 percent in 1990 to 6 percent in 2002.’’ The situation o f the poor i s described in detail below.

Characteristics of Children Not Enrolled in (Compulsory) Primary Education

Although i t might have been natural to focus on pre-primary enrollments first, this section starts with an analysis o f determinants o f enrollment in primary education. The reason i s because o f extremely low pre- primary enrollment (and lack o f relevant questions in household surveys). UNESCO estimated that only 6 percent o f children o f the relevant age group were enrolled in pre-primary school in 2000. There are 9,225 public and 432 private pre-primary schools in Turkey (1,657 are categorized under “other”) (Ministry o f National Education, 2003).

’* The source for these statistics i s the 2003 World Development Indicators database.

50

According to the 2002 HBS, 97 percent o f the relevant age group (ages 6 t o 14) are either enrolled in school or have already completed the primary cycle. The Turkish Government has attempted to increase compliance with the compulsory schooling law, by providing financial support to the poorest households who cannot afford to send their children to school-under both ad hoc social assistance and as supported by the Wor ld Bank under the conditional cash transfer component o f the Social Risk Mitigation Project -and also, in some cases, by fining parents who might be unwilling to send their children to school for one reason or another (the reasons might be unwillingness to send girls to school in rural areas, the desire to supplement household income through chi ld labor, and so forth).

Attending or Already Completed (compulsory)

Primary Schooling

GENDER

Table IV.4 displays the characteristics o f the “3 percent” that i s lef t out o f the schooling system. The distinguishing features o f these children would be useful in targeting efforts to achieve universal enrollment in primary school.

Not Attending and Never Completed (compulsory) Primary Schooling

The age distribution o f children who are not currently attending primary school rules out the possibility that many o f these students are simply late enrollers: those age 9 or older make up more than 90 percent of a l l children who are primary-school age but who are outside the schooling system. About 50 percent o f the children who are not attending school reside in Eastern Anatolia or South Eastern Anatolia. However, the 2002 survey i s not representative at the regional level, and thus there may be some error in regional estimates. More than 70 percent o f the children who are not enrolled in primary school are female, and more than 55 percent have illiterate mothers. These children tend to reside in rural areas (67 percent) and they tend to be poor (53 percent).

Male Female

Table IV.4. Characteristics of Children Aged 6 to 14, by Primary School Attendance Status (reported numbers are percentages)

5 1.82 27.79 48.18 72.2 1

MOTHER’S SCHOOLING

51

200,000) Rural

HOUSEHOLD POVERTY STATUS

Poor Non-poor

Sample size

I t might seem diff icult to identify a small proportion o f children, such as 3 percent, but for households with certain characteristics, the percentage o f children who are not enrolled in school i s much higher. Parental schooling and gender o f the chi ld alone may not be good enough to narrow down children who are not in school, but jointly, these two indicators are adequate. Table IV.5 shows that if one focuses on fathers with n o schooling, in almost 1 out o f 10 cases, a ch i ld (aged 6 to 14) who does not attend school would be identified. A systematic intervention that reaches a l l mothers and fathers without primary schooling would identify roughly 70 percent o f children who should attend primary education but who do not. If these children attended school, the primary enrollment rate would increase from 97 percent to 99 percent.

60.02 66.68

33.69 53.15

66.3 1 46.85

6,587 205

Table IV.5. Primary School Attendance by Parental Schooling

Father did not complete primary (illiterate or literate without diploma)

Mother did not complete primary (illiterate o r literate without diploma)

Percentage of Children Aged 6-14, Who D o Not Attend School (and who have not already completed primary)

Both Genders Ma le Female

9.1% 5% 12.5%

6.1% 2.7% 9.7%

School availability in the residential area might be one reason for non-enrollment. This issue seems to be especially relevant in less-developed areas for female children, even if transport to the nearest school i s arranged by the local authorities. The 2001 HCIS data reveal that 88 percent o f households have a primary school in their residential area. Primary school availability does not vary much by wealth, as measured by a household possessions index. In fact, if anything, the distribution o f primary school availability i s pro-poor (about 91 percent o f the least-wealthy households report the availability o f a primary school; about 85 percent o f wealthiest households report availability). This trend i s primarily driven by urban versus rural residence: 87 percent o f urban households reveal primary school availability in their neighborhoods, whi le in rural areas this percentage increases to 95 percent. These statistics suggest that the school availability issue at the basic education level has been more or less resolved. In urban areas, even if a primary school i s not available in the immediate residential area, there would be one in an adjacent neighborhood. For small rural villages, o n the other hand, access to schooling i s through government-subsidized transportation o f children to nearby villages or towns. Table IV.6 presents the average distance to primary school, by residence and household wealth, conditional on school availability in the residential area. The mean distance to primary school i s higher in rural areas and for the poor, but

52

the differences are not large. Having said that, long distances might be more significant in rural areas because o f physical barriers such as streams, hills, and poor road conditions.

Access

Primary School

Table IV.6. Conditional on School Availability in the Residential Area, Estimated Distance

Residence Wealth Quintiles Urban Rural All (based on a household possessions index)

Group 1 (poorest) Group 2 Group 3 Group 4

300 500 300 300 300 300 300 [445] [600] [475] [5 141 [4721 ~4281 ~4861

What Happens After Eight Years of Primary Education?

As shown, the demand for (noncompulsory) general secondary education has increased in recent years. This i s l ikely to be one o f the positive side effects o f 8-year compulsory schooling, since it increased the number o f potential secondary school students, and also increased the amount o f time parents interact with teachers and the schoo1,system.

A convenient way to present the impact o f the main factors that influence whether a child enrolls in secondary school i s through the presentation o f marginal effects on enrollment, as estimated by a probit model (Table IV.7). This i s a reduced form approach, takmg into account only the following: child’s gender, proxies for household wealth, indicators for parental schooling and presence in the household, and dummy variables for urbadrural residence and secondary school availability in the residential area. These models are estimated with and without school availability indicators, and also separately for males and females. The key insights from this exercise are as follows:

0

0

Taking into account other factors listed above, being a male increases the probability of secondary school enrollment by 7 to 8 percentage points. Compared to the least-wealthy group o f households, the next wealth category increases enrollment probability by roughly 7 percentage points. This figure increases to over 11 percent for other wealth categories. When other factors are taken into account, mother’s and father’s schooling coefficients are not statistically significant, except for the category “more than primary,” which i s associated with a more than 10 percentage point increase in enrollment probability. (If both the mother and father have more than primary schooling, this translates into an increase o f over 20 percentage points in the probability o f enrollment, which i s quite substantial in itself). Mother’s absence from the household severely reduces the chances o f secondary school enrollment-by almost 16 percentage points. A peculiar result i s the statistically insignificant coefficient estimates for father’s absence.”

0

0

l 9 This might be because we focus on the schooling o f household head and his or her spouse’s children. A selection bias might be responsible for this peculiar finding: it could be that if the father i s not a part o f the household (dead, divorced, and so forth), only women with certain unobserved (but pro-child education) characteristics become household heads. In other words, some women separated from the father o f their children may become household members in an extended household, and the schooling status o f these women’s children i s not captured in this estimate (because the household survey questionnaire allows only household head’s children to be matched to their mother and father).

53

0 Secondary school availability in the residential area i s a very strong predictor o f enrollment, leading to a 10 percent increase in probability o f enrollment. Those who reside in urban areas reap another 5 percent increase.20

Estimating separate models by gender allows evaluation o f the differential effects of certain household characteristics o n the enrollment o f boys and girls. Occurrence in the wealthiest group o f households perfectly predicts secondary school enrollment for boys. Having a mother with more than primary schooling is more important for girls’ schooling than for boys’, but the differences are minor in models that control for school availability. The importance o f father’s more-than-primary schooling for girls’ enrollment i s quite pronounced though, increasing the probability o f enrollment by 17 to 20 percentage points in alternative specifications. Mother’s absence hurts girls’ schooling prospects more. The impact of secondary school availability i s gender neutral. Urban residence does not have a statistically significant influence o n boys’ enrollment, but i t i s crucial for girls’ enrollment (giving a boost o f 21 to 26 percentage points in the probability o f enrollment). The presence o f such a large urbadrural residence effect-even after taking into account parental schooling and secondary school availability-deserves careful consideration. Some possibilities that might explain this trend are demand for girls’ time in farm work, and the prevalence o f teenage marriage.

Table IV.7. Predictors of Continued Education after Completion of %Year Primary School

WEALTH GROUPS

MOTHER’S SCHOOLING

2o When high school availability i s excluded from the model, the “urban residence premium” increases to 10 percent, partly capturing the fact that high schools are more likely to be available in urban areas. While availability o f secondary schools has a clear impact on enrollments, i t should also be recognized that in some rural areas with sparse population distribution, alternative approaches may be cost efficient (these include subsidized bus service to schools or the establishment o f boarding schools etc.)

54

More than primary

FATHER’S SCHOOLING

No schooling

Some primary

Primary graduate

More than primary

Mother absent from household

Father absent from household

Secondary school availability in the residential area (1 if available, 0 otherwise)

Urban residence

Means Both genders Males Females &

Model1 Model2 Model3 Model4 Model5 Model6 Std. Dev.

.115 .099 .129 .121 .155 .124 .27 (3.11) (2.74) (2.16) (2.06) (2.22) (1.78) (.44)

_---- .14

.039 .030 .040 .04 1 ,070 .035 .15 (1.12) (0.87) (0.75) (0.80) (0.94) (0.47) (.35) .049 .036 .005 -.010 .127 .lo4 .29

(1.55) (1.20) (0.10) (0.20) (2.05) (1.77) (.45) .117 .lo2 . lo1 .086 .196 .169 .42

(3.13) (2.88) (1.81) (1.59) (2.69) (2.44) (.49)

-. 159 -. 158 -. 152 -.156 -.226 -.238 .07 (3.05) (3.05) (2.15) (2.22) (2.00) (2.02) (.26) .048 .032 .011 -.009 .110 .08 1 .06

(1.19) (0.78) (0.16) (0.12) (1.51) (1.07) (.24)

----- ----- ----- ----- ----- (.35)

.099 ----- .133 ----- .126 .66 (4.15) (3.47) (2.74) (.47)

. loo .052 .011 -.034 .259 .209 .8 1

-----

Since secondary school availability emerged as an important determinant o f enrollment that can be influenced by policymakers in the short run (as opposed to parental schooling, for example), the next step i s to see the extent to which certain households are disadvantaged when it comes to access to secondary school education.

(1 if urban, 0 if rural) (3.40) (1.91) (0.29) (0.94) (4.25) (3.46) (.39)

Log Likelihood -261.3 -244.2 -123.3 -116.4 -128.9 -117.7 Sample Size 792 768 355 346 343 332 792

Overall, there i s significant room for improvement when i t comes to secondary school availability. Only 64 percent o f households reported that a secondary school i s available in their residential area. As opposed to primary school availability, secondary school availability i s correlated with household wealth: 59 percent o f the poorest quarter of households reported a secondary school available in their area, while 69 percent o f the wealthiest did the same. Only 50 percent o f rural households reported availability, while 67 percent o f urban households did so. This situation i s further complicated by the presence of different types o f secondary schools (many vocational secondary schools with very l o w student-teacher ratios) that may not be attractive to large portions o f the population. Finally, Table IV.8 shows that $ a school is available in the residential area, then the distance to the school does not vary much by urbadrural residence or by household wealth.

55

Table IV.8. Conditional on School Availability in the Residential Area

Access

Secondary School

Residence Wealth Quintiles (based on a household possessions Urban Rural index)

All Group 1 (poorest) Group 2 Group 3 Group 4

500 400 500 400 500 500 500 [733] [526] [703] 16821 [7331 [6221 [7861

Universities and the Poor

Poor children are unlikely to receive even a secondary education. Public spending pattems would, o f course, have direct implications for the poor, if they overwhelmingly emphasized higher education (from which the wealthier are more l ikely to benefit), but, as discussed previously, the distribution o f resources among different levels o f schooling i s not particularly unbalanced (although overall public spending o n education i s low).

In Turkey, entrance to university i s primarily based o n a student’s performance in a centrally administered examination; grades in secondary school are the other factor that determines the overall score. Whi le this examination-based selection i s occasionally criticized, the system itself has important positive features. Perhaps most important i s the basic characteristic that the same questions are asked o f a l l students, and the evaluation i s undertaken in a consistent and centralized manner. Having said that, selective educational systems have been shown to cause significant inequality in other developing countries (see Mete, 2004). In the Turkish case, the solution to the inequality problem does not have much to do with the design o f the examination; rather, i t has to do with increasing the enrollment o f poor children in quality public basic education and general (academic) secondary schools.

Some insights into the status o f the few poor students who make it to the (two- or four-year) universities come from an analysis o f the 1997 University Student Survey, published by the Council o f Higher Education in 1998, under the title, “Parental Income, Educational Expenditures, Financial Aid and Job Expectations o f University Students.” The survey, implemented by the State Institute o f Statistics (DIE), collected information on about 80,000 students enrolled in 51 public and 7 private universities during 1996-1997. The response rate was 99 percent.

The study found that students coming from high-income families are much more l ike ly to be enrolled in private universities, and they are more l ikely to be enrolled in “well-established” and “new and developing” institutions. Thus, university enrollment o f students coming f rom poor households should be interpreted with the understanding that these students do not enroll in universities o f the same quality as wealthier students. Having said that, the observation that private universities tend to serve the wealthy i s neither a surprise nor a negative factor in and o f itself-as long as quality public universities exist with a respectable non-wealthy student enrollment. One way to relax the capacity constraint in higher education i s to allow and encourage the establishment o f private higher education institutions, as i s happening in Turkey.

Private tutoring plays a key role in determining who attends what type o f university, as acknowledged by 89 percent o f the undergraduate students who view private tutoring as necessary for success in the university entrance examination. About 78 percent o f a l l undergraduate students report receiving private

56

tutoring (almost 90 percent of those through taking preparatory courses in private tutoring centers). As the main reason for not participating in private tutoring, 57 percent o f the surveyed undergraduate students mentioned lack o f economic resources, 23 percent mentioned availability o f high-quality education in secondary school, and 5 percent mentioned absence o f private tutoring in their neighborhood. Thus, the poverty linkage i s revealed explicitly by the emergence o f the lack o f economic resources as a prevalent response, but also by the fact that the other common response i s "availability o f high-quality education at secondary school," which this Poverty Assessment chapter shows as unlikely for poor children. Furthermore, the statistics f rom the 1997 University Student Survey reflect the private tutoring patterns o f those students who gained acceptance to university.

The 1998 Council o f Higher Education report also contains statistics on receipt o f financial a id during undergraduate education. Household income status i s captured by the creation o f 15 income groups, which show that in public universities, 86 percent o f students coming f rom the least-wealthy households apply for financial aid, and among those who applied, 69 percent receive aid. For the students coming f rom wealthiest households, the percentages are 3 1 and 17 percent, respectively. In private universities, the percentages for children coming f rom the least-wealthy households are 20 and 20 percent, respectively. For those coming f rom the wealthiest households, they are 20 and 17 percent, respectively. As a result, while i t i s true that public universities fare better in terms o f having a pro-poor financial aid distribution, improvements are needed, because a significant portion o f wealthy students receive financial a id while some o f the least-wealthy students are denied aid.

Quality of Education (International Comparisons)

Turkey has participated in the 1999 Trends in International Mathematics and Science Study (TIMSS), along with 37 other nations. Turkey ranked 3 1st and 33rd in mathematics and science achievement tests, respectively, administered to eighth-grade students, out o f a total o f 38 countries. Whi le these results are not encouraging, i t would be more productive to view them as baselines that need to be monitored and improved over time. For one thing, the countries that participate in this examination scheme are not randomly selected. Many o f them are wealthier than Turkey. Figures IV.6 and IV.7 present test scores by GDP per capita. Focusing on the countries that are in the same GDP per capita neighborhood, Turkey s t i l l ranks at below-average performance, however.

Figure IV.6. 1999 TIMSS Mathematics Achievement of Eighth-Grade Students

a mu IWW 15ow mwo 2 5 ~ ~ 1 xm 30m 4oaw 4 m u m o a GDP p r sapits (in 1999)

I Note: CounQ codes: Singapore (SGP), Republic of Korea (KOR), Taiwan (TWN). Hong Kong (HKG), Japan (JPN), Belgium (BEL), Netherlands (NLD). Slovak Republic (SVK). Hungary (HUN), Canada (CAN), Slovenia (SW). Russian Federation (RUS), AUShRh (AUS), Finland (FIN), Czech Republic (CZE), Mdaysia (MYS), Bulgaria (BGR), Lamia fL VA). United States (USA), United Kingdom (GBR), New Zealand (NZL), Lithuania (LTU), Italy (ITA). Cyprus (CYP). R0"ZiR (ROM). Moldova (MDA), Thailand (THA). Israel (ISR). Tunisia (TUN), Macedonia (MKD). Turkey (TUR), Jordon (JOR). Iran (IRNj. Indonesia (IDN), Chile (CHL), Philippines (PHLj. Morocco (MAR), South Africa (ZAF).

5 7

Figure IV.7. 1999 T I M S S Science Achievement o f Eighth-Grade Students

250 + 200 '

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000

GDP per capita (In 1999)

Note: Country codes: Singapore (SGP), Republic o f Korea (KOR), Taiwan (TWN), Hong Kong (HKG), Japan (JPN), Belgium (BEL), Netherlands (NLD), Slovak Republic (SVK), Hungary (HUN), Canada (CAN), Slovenia (SVN), Russian Federation (RUS), Australia (AUS), Finland (FIX), Czech Republic (CZE), Malaysia (MY S), Bulgaria (BGR), Latvia (LVA), United States (USA), United Kingdom (GBR), New Zealand (NZL), Lithuania (LTU), Italy (ITA), Cyprus (CUP), Romania (ROM), Moldova (MDA), Thailand (THAI, Israel (ISR), Tunisia (TUN), Macedonia (MKD), Turkey (TUR), Jordan (JOR), Iran (IRN), Indonesia (IDN), Chile (CHL), Philippines (PHL), Morocco (MAR), South Africa (ZAF).

Household Survey Evidence on Variations in Quality of Education

There are a number o f reasons poor parents do not send their children to school. Some may choose to restrict the lives o f females in a number o f ways, including not sending girls to school. In other cases, schools may not be available, which this report has shown to be the case especially in rural areas at the secondary school level. If schools are available, then the value o f children's time becomes a factor. As discussed, this i s l ikely to be the case especially in rural areas. I t could also be that, despite high private returns to higher education, lack o f access to credit (that is, inabil ity to borrow against future income) may force some children to quit school. A related issue i s access to "quality schooling" at the primary and secondary level: rates o f return to early levels o f schooling depend in part on quality o f schooling (Behnnan and Birdsall, 1983). Furthermore, the breadth o f training in early levels o f schooling determines which, if any, universities poor children can attend.

Do poor children have access to quality schooling?21 Are wealthier parents more satisfied or less satisfied with the education their children receive? H o w do private schools fare when it comes to parental satisfaction with schooling?

Quality o f schooling can b e defined in a number o f ways. Input-based objective measures focus o n actual observations o n school characteristics such as amenities; output-based measures often focus o n standardized test results. These data are rarely available in a manner that can b e l inked to household characteristics o f children. The approach fol lowed here is dictated by data availability, which i s t o re ly o n parental perceptions about the quality o f schools that their children are enrolled in. As with other alternatives, this approach has pros and cons. On the positive side, parents might b e considering a large number o f factors that may not be fully captured o r appropriately weighted by analytical approaches. On the negative side, a key issue might be what parents f rom different socioeconomic backgrounds consider quality education. For example, it could be that for illiterate parents, quality education means that teachers regularly show up and their children can read. Other parents might have more stringent quality criteria. There are two mediating factors here. First, the direction o f the possible bias i s rather obvious. If poorluneducated parents are more l ike ly to say that school quality is bad, then the differences between schools that serve poorluneducated and wealthyleducated are probably even more pronounced than the survey data

21

58

Of those household members who were attending school at the time o f the 2001 HCIS, 2.3 percent attended private schools (2.6 percent in urban areas and 1.3 percent in rural areas). Among the least- wealthy quarter o f households, private school attendance was 1.3 percent, and among the wealthiest quarter o f households, i t was 5.8 percent.

Figure N.8 shows that household members are more l ike ly to report problems with public schools compared to private schools. The leading problems are lack o f books and supplies, reported as a problem for 15 percent of children enrolled in public schools and 10 percent o f children enrolled in private schools. The next major problem, in both public and private schools, i s poor teaching, which was reported in about 10 percent o f cases.

Figure IV.8. Problems with Schools, Public and Private

Total

i3.34

Public Private

DNo problem .Lack of b00kSiSUpplieS DPWrteachiw ELack of teachers DFacilities in bad andittons .Other Dmbiems

Source: 2001 HCIS. Based on a sample o f 2,638 children enrolled in public schools and 62 children enrolled in private schools at the time o f the survey.

The urbadrural differences are unequivocal (Figure IV.9). Only 45 percent o f responses indicated “no problem with school” in rural areas, compared to 68 percent in urban areas. In rural schools, both lack o f bookshppl ies (22 percent) and poor teaching (15 percent) are widespread. In fact, in more than 7 percent o f cases, “lack o f teachers” was reported as a problem.

reveal. Second, one can interpret the results, f r o m a rather narrow perspective, as satisfaction from received education services (rather than as a p roxy for actual quality o f schooling received). The differences between the replies o f poor and non-poor households would st i l l b e o f interest.

59

Figure IV.9. Problems with Schools, Urban, and Rural

(Percent)

70 -

Wealth Quintiles (based on a household possessions index) Group 1 (poorest) Group 2 Group 3 Group 4

I I I

20-

10-

0 Total

44 51

Urban Rural

UNO problem .Lack of taokdsuDDlies UPwr teaching ELack of teachen UFacilities in bad conditions .Other Dmblems

Source: 2001 HCIS. Based on a sample o f 2,200 children enrolled in urban schools and 537 children enrolled in rural schools at the time o f the survey.

Wealthier households are much less l ikely to report problems with schools (Table IV.9).22 Complaints about lack o f books and supplies decline drastically as household wealth increases. This i s not surprising, since wealthier households can afford to ensure their children have the necessary books and supplies. Complaints about facilities also decline with wealth, which may suggest preferential treatment o f schools located in wealthier neighborhoods (although, i t may also be a result o f higher informal contributions f rom wealthy families to the school). Whi le complaints about poor teaching remains constant at around 10 percent for a l l wealth groups, complaints about “lack o f teachers” declines with the wealth o f households.

Table IV.9. Problems with School

22 Th is t rend i s no t d r iven by the relat ively smal l percentage o f households that send their ch i ld ren to pr ivate schools.

60

Consistent with the reporting o f problems with schools, satisfaction with schooling i s higher for private schools (Figure IV. 10) and for urban schools (Figure V.11). Interestingly, though, satisfaction with schooling i s not that sensitive to changes in household wealth (Table IV.10).

Figure IV.10. Satisfaction with Quality of Education

I

60 -

50 -

0 All households Public Private

1 DCompletely satisfied OSatisfied DNo idea DDissatisfied Completely dissatisfied

(based on a sample o f 2,670 currently enrolled students [2,610 public and 60 private])

Figure IV.ll . Satisfaction with Quality of Education

45 - 40 -

35 -

30 al 0

c (I)

(I) a

25

2 20

15

10

5

0 All households Urban Rural

-

OCompletely satisfied OSatisfied No idea BDissatisfied DCompletely dissatisfi ~ _ _ _ ~ _ _ _

ised on a sample o f 2,733 currently enrolled students [2,200 urban and 533 rural])

61

Table IV.10. Satisfaction with Quality of Education (percentages are reported)

I Sample size 674 758 639 660 I

Household heads that reported members enrolled in school also indicated perceptions about trends in the quality o f schooling. About 25 percent o f household heads believed primary school service improved in the last two years, 69 percent believed it remained the same, and 6 percent believed service worsened. This time, the wealth effects are visible. About 8 percent o f the poorest quarter o f the households believe the service has worsened in the last two years (in contrast, only 4 percent o f the wealthiest quarter o f households believe primary school service has worsened). Similarly, there are differences by urbadrural residence: in rural areas over 9 percent o f households felt primary schooling quality worsened, whereas only 5 percent o f urban households reported declining primary school quality.

A smaller percentage o f household heads believes secondary school quality has improved in the last two years (2 1 percent). The differences in perceived secondary school quality are negligible among wealthy groups. Urbadrural residence also does not matter much.

E. ECONOMIC GROWTH AND LABOR MARKET IMPLICATIONS OF A PUBLIC POLICY THAT UNDERVALUES EDUCATION

Physical capital and human capital are complements. An optimized combination o f physical and human capital leads to highest economic growth: if one i s too low, the other does not produce much.23

Bo th public and private rates o f return to schooling are high, although an empirical regularity i s that there i s a substantial gap between public and private rates o f return to higher education.24 Consistent with this evidence, emphasis on early levels o f schooling i s considered to be a key ingredient in the remarkable economic growth performance o f the Asian Tigers that spans three decades (with a br ie f halt at the end of the 1990s)-along with generally prudent macroeconomic policies (Mingat 1998). Investment in education also has a self-reinforcing dimension in that the positive impact o n economic growth translates into more resources that can be devoted to education (even i f the share o f public spending o n education remains the same), which in turn aids economic growth and so on. Indeed, with the exception o f the early decades following the foundation o f the republic, Turkey’s failure to invest more aggressively on early

23 The pathways o f the relationship between population’s educational attainment and economic development are complex and discussed thoroughly in the literature. On the relationship between physical capital and human capital see, for example, Heckman (2003). 24 Various studies since then have confirmed these important findings, but the original reference is Psacharopoulos (1994).

62

levels o f schooling has meant missed opportunities both for unschooled individuals and for the economy in general, as partially revealed by the labor market trends that are reported next.

Returns to Schooling in Turkey

As mentioned, private returns to schooling are very high in Turkey. Table Iv. 1 1 presents the results f rom the estimation o f a Mincerian-type semi-log wage equation (Mincer 1974) using data f rom the 2002 HBS. The dependent variable i s the natural l og o f hourly earnings. Explanatory variables are indicators for gender, potential experience (and its square divided by loo), schooling attainment, urban residence, and region o f residence. Individuals aged 25 to 64, and who report non-zero earnings in the reference month, form the sample. This section outlines key findings from this exercise.

These estimates are provided here as the basis for highlighting key trends in earnings that are o f particular interest to this study. Readers interested in this topic should also refer to Dayioglu and Tunali (2004), who carry out a more elaborate investigation o f the determinants o f earnings (the main trends discussed here are consistent with their findings) by using data f rom 1988 and 1994 in addition to 2002, by employing Oaxaca-Blinder wage gap decomposition to better illustrate gender inequalities, by including provincial variables (such as share o f manufacturing, trade), and so forth.

On average, males earn 45 percent more per hour than females of similar characteristics. Schooling has a robust, positive, and large impact on earnings. Vocational junior secondary school graduates earn more than general junior secondary school graduates; similarly vocational secondary school graduates earn slightly more than general secondary school graduates. There are a number o f selectivity issues that hinder a clear-cut interpretation o f these estimates. For example, one could argue that because “more able” general secondary graduates continue their education at the university level, the observed returns to general secondary education are underestimated. On the other hand, one could also claim vocational school students are disadvantaged in terms o f family contacts or other unobserved characteristics that depress the distribution o f their earnings.

When separate models are estimated for males and females, we see that the coefficients for secondary and higher education are much larger for females. As discussed, o n one hand, females earn less than males o f similar characteristics in the labor market. But o n the other hand, the impact o f schooling o n earnings i s even more visible for females. A f inal issue that deserves emphasis i s the gender distribution o f those who reported non-zero earnings in the reference month: 85 percent o f this group i s male. These findings are supportive of the literature that argues that payoffs to educating girls are at least as high as to educating boys, especially in countries l ike Turkey, where the gender gap in schooling i s significant- because social rates o f return decline with schooling. Other reasons for emphasis o n girls’ schooling include the close linkage between a mother’s schooling and children’s health and education, and the empirical regularity that more educated women are more l ikely to participate in the labor force, thus broadening the tax base (Schultz 2002).

63

Table IV.11. Ordinary Least Squares Estimates of Log-Hourly-Earnings

(13.9) (11.4) (6.23) [.239]

Urban Residence

Marmara

Note: It/-statistics are in parentheses; individuals aged 25 to 64 are included in the sample. Source: DIE 2002 HBS.

Higher Education

64

1.59 1.40 1.86 .125

UnempIoyment by SchooIing Attainment

The evolution of unemployment rates over time i s shown in Figure IV.12, separately for males and females, and for younger individuals. Figures IV.13 to IV.20 display unemployment rates by schooling attainment. The data for these figures come from the State Statistics Institute (original data source i s the 1990-2003 Labor Force Surveys).

Figure IV.12 shows that (a) since 2000, unemployment rates have been on the rise; (b) youth unemployment rates are significantly higher than overall unemployment rates; and (c) the probability of unemployment i s higher for males in recent years, especially among youths.

While each of the remaining figures could be discussed separately, for brevity, three issues will be mentioned here. First, the female unemployment rate i s higher among (vocational and general) secondary school graduates. Second, the unemployment rate among vocational secondary school graduates tends to be at about the same level as the unemployment rate among general secondary school graduates-in fact, in some cases vocational school graduates are much more likely to be unemployed. Third, those with higher education diplomas are unique in that there i s a clear distinction between their overall unemployment rates (low compared with others in the sample) and youth unemployment rates (very high at around 35 percent). Since this trend has persisted since 1990, one explanation i s the possibility that reservation wages are higher for recent higher-education graduates, such that they are more selective when it comes to accepting jobs, compared to less-educated individuals. But overall unemployment rates are lower, as one would expect-skilled individuals have more opportunities in the labor market, and this effect seems to dominate other factors (such as differences in reservation wage) eventually when it comes to determining observed unemployment rates. Finally, among individuals who have completed higher education, the female unemployment rate i s much higher, despite the lack of a gender difference among the younger cohorts. This i s a finding for which we have no explanation at this stage.

Figure IV.12. Unemployment Rates Over Time

25 0-

20 0-

al m c

1501 8

0 E,

E 100-

- n

C 3

5 0

65

Figure IV.13. Illiterate Unemployment Rates Over Time

25.0-

200

P m z 150 C 0

k l 0 - Q

E 100-

I

C 3

50-

001 1990 1931 1992 1993 1994 1995 1996 1937 1998 1999 2ooo 2M1 'XJlZ 2003

-+Me Lk"@o,nm Rae -%Fenale LhE@qmert Rae +Fn;leYu& UlnplOymrt Fate uFenaleYadh LhE@u,m-d Rae ~ _ _

Figure IV.14. Literate Without Diploma Unemployment Rates Over Time

I

1 0.0- 1990 1931 1992 1933 1994 19% 1996 1937 1998 1999 2Mx) 2M1 2002 xo3

66

Figure IV.15. Primary School Graduates’ Unemployment Rates Over Time

I

I

20 0.

a m 5 150. S a

- - 6 a E 100- 5

I

5 0

J

Figure IV.16. Junior Secondary Graduates’ Unemployment Rates Over Time

250-

d l 2

E

E

d C 200.

- a E 150

3

10 0

67

Figure IV. 17. Vocational Junior Secondary Graduates’ Unemployment Rates Over Time

€00.

500

e ? : 400 0

3 i : 330 0 3

200

I 1004

Figure IV.18. Secondary School Graduates’ Unemployment Rates Over Time

400

350 > i ; 330

? ;EO

i i 200 )

50

68

Figure IV.19. Vocational Secondary School Graduates' Unemployment Rates Over Time

Figure IV.20. Higher Education Graduates' Unemployment Rates Over Time

? Lao- ?

' 150

69

CHAPTER V: HEALTH

This chapter looks at health status, access to, and use of health care services, and private and public expenditure on health care, with the objective o f determining to what extent the lower-income groups have adequate health care protection. I t i s largely based o n data o f the health module o f the 2001 Household Consumption and Income Survey (HCIS), and on data on health care expenditure f rom the 2002 Household Budget Survey (HBS). Data o f the 2003 Demographic and Health Survey (DHS) were not available to support this chapter, nor were the data of a household health survey carried out as part o f the National Health Accounts exercise, which was completed in 2003.25 The chapter draws on work carried out in the framework o f the Wor ld Bank’s Turkey Health Sector Report (World Bank 2003~) .

A. THE HEALTH CARE SYSTEM

Turkey’s health care delivery and financing system has been characterized by fragmentation. Health services are supplied by a multitude o f public and private providers, with the main providers being the Ministry o f Healthy (MOH), the Social Insurance Organization (SSK), and the university hospitals. The MOH i s the major provider o f primary and secondary health care services, and essentially the only provider o f preventive health services. MOH operates an extensive network o f health facilities, including rural health posts, health centers, dispensaries, and hospitals that provide outpatient specialist and inpatient care. SSK operates an extensive network o f hospitals that provide outpatient and inpatient care, and a smaller network o f primary care facilities. University hospitals provide tertiary inpatient and outpatient care. Until recently, access to SSK facilities was l imi ted to those covered by SSK’s health insurance scheme (for example, formal sector employees and their dependents), and to those covered under Bag-Kur Insurance (self-employed and their dependents). Under the government’s recently adopted reform program, the distinction in access to SSK and MOH hospitals and health centers has been removed, and patients are now free to visit the facility o f their choice.

Although sti l l small compared to the public health care sector, provision o f health care services by the private sector i s gaining importance, particularly in urban areas and in the western parts o f the country. Private outpatient care i s provided in various settings, including private doctors’ offices, polyclinics, and medical centers, private services provided in public hospitals, health services provided by occupational physicians in companies with more than 50 employees, private hospitals, and foundation hospitals.

25 Given the age o f the available D H S data and the fact that the 2003 D H S data wil l become available during the second ha l f o f 2004, an analysis of D H S data by household welfare level, along the l ines o f the one carried out by the Wor ld Bank using 1993 D H S data, was not undertaken.

70

Table V.l. Distribution of Primary Care Health Staff, by Region, 2002

Population/ Population/ Population/ Doctor Midwife Nurse

Marmara 7,65 1 5,569 9,382

Mediterranean 3,595 2,341 5,440 Central Anatolia 3,985 4,339 5,409 Black Sea 3,747 2,952 4,770 Eastem Anatolia 5,223 4,511 5,923 Southeastern Anatolia 7,304 6,960 10,477

Aegean 3,565 2,333 4,597

Turkey 4,708 3,672 6,196 Source: MOH, General Directorate of Primary Health Care web page.

Table V.2. MOH Health Centers and Health Posts Lacking Key Staff, by Region, 2002

Region Number of Health % of All Number of Village YO of 'YO of Births Unattended Centers without Health CentersHealth Posts without Health Posts

Doctors Midwives by Health Staff

Marmara 97 11 89 1 62 2% Aegean 129 13 814 55 6% Mediterranean 78 9 808 70 3% Central Anatolia 151 14 1,353 80 4% Black Sea 130 13 2,326 77 4% Eastern Anatolia 116 20 1,660 90 19% Southeastern Anatolia 84 20 984 90 20%

Turkey 785 13 8,836 75 6% Source: MOH, General Directorate o f Primary Health Care web page.

Although significant efforts have been made over the past two decades to expand the health care network and assure adequate physical access to health facilities across the country, the service delivery network remains highly uneven. Health facilities and health care professionals remain concentrated in urban areas, particularly in the three largest cities, Istanbul, Ankara, and Izmir, while many rural areas, especially in Eastem and Southeastem Anatolia, suffer f i o m severe shortages o f medical staff (Table V.l). The skewed distribution o f facilities, and particularly o f staff, has resulted in significant regional differences in access to and use o f health care and, concomitantly, health outcomes (Tables V.2 and V.3). The chronic shortage o f health care staff in primary care facilities in many rural areas in general and in the East and Southeast in particular, has been compounded by a lack of operating budgets in many primary care facilities. This, in tum, has led to the perceived l o w quality o f care provided at the primary care level, as demonstrated by patients' frequently circumventing primary care and self-referring directly t o higher- level specialist or private care. Unequal service provision has resulted in a marked regional difference in health sector performance and, consequently, also widely varying health outcomes.

71

Table V.3. Regional Distribution of Hospital Beds, 2002

Total Beds/10,000 Admissions/ Number of Beds Population 1,000 Population

Marmara 49,655 27.5 Aegean 21,541 23.5 Mediterranean 17,306 19.2 Central Anatolia 3 1,679 26.6 Black Sea 22,303 26.4 Eastern Anatolia 13,823 18.0 Southeastem Anatolia 5,928 10.9

76.6 84.4 71.4 87.6 83.1 64.6 47.0

Turkey 162,235 23.3 76.0 Note: Admission figures are for 2000, beds for 2002. Source: MOH, In-patient Treatment Institutions, Statisical Yearbook (2003).

B. HEALTH INSURANCE

Several public health insurance schemes currently provide financial protection to various target groups. Of those, the health insurance o f the SSK i s the most important, and provides coverage to those employed in the formal sector and their dependents. Bag-Kur i s the health insurance for the self-employed, including in principle the rural population and informal sector workers. Emekl i Sandigi provides health insurance to retired c iv i l servants, while those in active c i v i l servant status are covered directly through their employers. In 1992, the Government introduced the green card system, designed to afford protection to low-income groups who are not covered otherwise. Private voluntary and supplementary insurance i s also available. T o increase operational efficiency and improve health insurance coverage, the Government plans to shift from the currently multiple public insurance schemes to universal health insurance, which would operate o n the principles o f solidarity and risk pooling, and provide coverage to the entire population. The Government would make contributions o n behalf o f those who cannot afford to do so themselves, while others would contribute through the social insurance system. Implementation o f this system i s expected to be gradual, with completion around 201 1.

Bo th the 2001 HCIS and the 2002 H B S provide information about the population’s health insurance coverage (Figure V.1). Bo th surveys suggest that over one-third (36 to 37 percent) o f the population does not have access to health insurance, including the green card program.26 The data suggest that in rural areas, almost ha l f the population has n o health insurance, and in urban areas, about one-third has none. Because a larger share o f the lower-income groups i s employed in the informal sector, the share o f those in lower-income groups that i s covered by health insurance (including green card) i s significantly smaller

26 W h i l e the 2001 HCIS and the 2002 HBS show highly similar figures with respect to health insurance coverage, other data sources suggest a somewhat higher share o f coverage. For example, the Draft National Health Accounts Report suggests that about one-third o f the population remains without health insurance coverage, compared to 36 percent implied by the 2002 HBS and 37 percent implied by the 2001 HCIS. Furthermore, official records indicate that in 2001, about 75 percent of the population was covered by insurance, wi th this share rising to almost 83 percent in 2003 (data provided by Emekli Sandigi and Ministry o f Labor). I t is, however, thought that official records include a significant amount o f double counting (see for example, World Bank 2003c) and are thus not an appropriate mechanism to determine the number o f people without coverage.

72

than among upper-income groups (42 percent in the bottom quintile are covered, compared to 79 percent in the top quintile).

Figure V.1. Share of Population with Health Insurance, by Quintile

9 0 % 8 0 % 7 0 % 6 0 % 50% 40% 3 0 % 2 0 % 1 0 %

0 %

=Rura l

1 2 3 4 5 To ta l

Quint i le

S o u r c e : 2 0 0 1 H C I S .

The green card program, which was introduced in 1992 to provide insurance protect.-.l to low-income households, does provide protection to those who benefit from it, but fails to provide broad coverage to all those living in paver$' (Table V.4). HBS data suggest that more than hal f (58 percent) o f those who live below the poverty line, and over two-thirds o f the extremely poor, remain without any insurance coverage, while somewhat under one-fifth o f the extremely poor, and less than 10 percent o f the poor, benefit from the green card program. On the other hand, the data suggest that two-thirds o f green card holders are not poor.28 Thus, an important share o f the lowest-income households remains without any access to health insurance coverage, which in turn requires that they make significant out-of-pocket payments when seeking health care.

Table V.4. Health Insurance Coverage and Poverty

Extremely Insurance Status Poor Poor TOTAL

% of poor with insurance

Compulsory Voluntary Compulsory and Voluntary Green Card None

28% 13% 54% 3% 0% 4% 3% 0% 2% 9% 18% 4%

58% 68% 36%

Total 100% 100% 100% Source: 2002 HBS.

27 This analysis i s based on the food poverty and poverty l ines used throughout this report. 28 Green card program eligibility criteria stipulate that a Turkish citizen, not covered by any social insurance and with a monthly income o f less than one-third o f the net minimum wage, i s eligible for green card coverage. In 2002, the net minimum wage was TL174 million, making the cutoff point for qualification under the green card program TL58 million, which i s below the adult equivalent per capita poverty l ine used in this report.

73

C. HEALTH OUTCOMES

Health outcomes in Turkey are poorer than would be expected in a country with Turkey’s income level. Despite considerable progress achieved in the recent past, Turkey continues to rank far behind most middle-income and European Union (EU) accession countries on key health indicators. L i f e expectancy i s 9 years lower than the average for women in Organization for Economic Co-operation and Development (OECD) countries, and 7.5 years lower for men (Table V.5). Infant and maternal mortality rates are among the highest in the Europe and Central Asia (ECA) region and among middle-income countries. Turkey also continues to have a relatively high death toll from preventable infectious diseases, and scores relatively poorly in terms o f vaccination coverage.

Table V.5. Health Status Comparisons, 2002

Southeast and Central

Turkey Europe Europe OECD

Life Expectancy Male 66.2 69.7 69.4 73.8 Female 70.9 77.8 77.2 79.9

Infant Mortality per 1,000 life births 36.0 9.7 10.5 7.3 Maternal Mortality 100.0 18.1 13.0 Sources: WHO-HFA, OECD Health Indicators, Turkey MOH. Note: Data are for 2002 or most recent available prior to 2002.

Key health outcome indicators vary markedly across urban and rural Turkey and across regions, reflecting the uneven supply o f and access to health care across regions. Infant and child mortality rates are substantially below the national average in urban areas and in Western and Southern Turkey, but almost 40 percent above the national average in rural areas and in Eastern Turkey, and this gap has widened over the past decade (Figure V.2).29 Similarly, vaccination coverage o f infants and pregnant women i s significantly lower in the poorer Eastern and Southeastern Provinces than in the rest o f the country, although the gap has begun to narrow over the past five years (Table V.6).

Figure V.2. Regional Variation in Infant and Child Mortality Rate; and Regional Variation in Prenatal Care and Home Births

Regional Variation in Infant and Child Mortality

Regional Variation in Prenatal Care and Home Births

80 80 0% without pre-natal 60 60 care

40 0% home births 40 20

20 0

0 North South Center W e n East Rural Urban

. I Source: DHS (1998).

29 Health Outcome Indicators on a regional basis are not readily available. The only data available for this report were the 1998 DHS data as data from the 2003 DHS were not yet available for inclusion.

74

Table V.6. Vaccination Coverage of Infants and Pregnant Women (TT-2T), by Region, 1998-2002

BCG DBT-3/OPV-3 Measles HBV-3 TT-2T 1998 2002 1998 2002 1998 2002 1998 2002 1998 2002

Marmara 95 88 90 79 88 86 69 73 27 25 Aegean 86 88 85 80 85 85 87 82 57 58 Mediterranean 86 90 86 85 83 89 64 83 55 53 Central Anatolia 87 87 88 83 86 87 84 84 47 48 Black Sea 85 88 88 82 89 85 83 78 45 47 Eastem Anatolia 42 57 63 68 67 71 42 55 19 24 SoutheastemAnatolia 46 61 54 63 52 67 23 49 12 18

Turkey 77 82 79 78 70 82 65 72 36 37 Source: MOH webpage.

The Turhsh health system faces a dual challenge. Significant parts o f the country and the population continue to be afflicted by a high burden o f disease from preventable infectious diseases, and high maternal and infant mortality rates typical o f developing countries. At the same time, a growing share o f the population i s affected by noncommunicable diseases prevalent in developed countries. Morbidity and mortality associated with heart and cerebrovascular diseases have increased sharply over the last two decades as, for example, reflected by a fourfold increase in hospital discharges for ischemic heart disease and cerebrovascular problems between 1988 and 2002, and an increase o f over 150 percent in registered cancer cases (WHO HFA 2004).

D. SELF-REPORTED MORBIDITY

Information o n self-reported morbidity i s available f rom the 2001 HCIS. The data indicate that 10.6 percent o f the population reported having been sick or ill during the month pr ior to the survey, and 3.6 percent reported having suffered from an illness that required hospitalization during the six months prior to the survey. Both the share of people reporting an illness or injury during the past month, and the share o f people reporting an illness requiring hospitalization, are higher among the lower-income groups, particularly in rural areas (Figure V.3 and Table V.7).

Figure V.3. Incidence of Illness Income Quintiles and Location

Ulllness/in]u!y past 30 days urban 20 0

15 0 MIllness/injury past 30

10 0 days rural

Oillness requiring

6 months urban

Total Oillness requiring hosoltalization Dast

5 0 hospitalization past

0 0

Per Capita Income Quintile 6 months rural '

~~ ~~~~~ ~~~

Source 2001 HCIS

75

Table V.7. Self-Reported Morbidity by Income Quintile

Quintiles of Per Capita ircome 1 2 3 4 5 Total

% reporting being sick/injured in past 30 days 13.0% 9.7% 10.0% 9.1% 1 1 . 0 % 1 0 . 6 % % reporting illness requiring hospitalization in past 6 months 5.6% 3.6% 2.9% 3.3% 2.8% 3.6%

Severity of ///ness (% of those reporting Illnesshjury last Month) Lif e-threatening 10% 5% 8% 5% 4% 6% Very Serious 15% 21 % 20% 16% 16% 17% Serious 54% 45% 41 % 53% 41% 47% Not Serious 21% 29% 31 % 26% 39% 29% Source. 2021 HCIS

Similarly, a significantly higher share o f those in low-income households report that the illness or injury from which they suffered during the month prior to the survey was l i f e threatening. The share of those indicating that the illness or injury was not serious i s almost twice as high among people in the highest income group than among those in the lowest quintile. The overall higher reported incidence and severity o f illness among the lower income groups, particularly in rural areas, may suggest poorer quality of care and more l imi ted access to and use o f health care among these groups, resulting in delayed treatment and thus more severe disease incidences.

A look at reported incidence o f disease by health insurance category indicates that those without any insurance report a slightly lower disease incidence than those with insurance (Figure V.4). This i s l ikely explained by the fact that the absence o f insurance creates access barriers to health care, which then lead those without insurance to less readily admit to being sick. International evidence has shown that self- reported morbidity tends to be associated with access to health care.

Figure V.4. Incidence of Morbidity by Health Insurance Status

% reporting being

sick/injured

114% I

0 % 5% 10% 15%

I N o Insurance OOther I G r e e n t Card 0 Private OBagkhur I S S K D E S

Source: 2001 HCIS.

E. ACCESS T O AND USE OF HEALTH CARE

Of those reporting an illness over the past month, 72 percent report seeking some form o f health care for the reported illness, with the share being lower in rural (66 percent) than in urban areas (74 percent) (2001 HCIS). The likelihood o f seeking care when ill i s significantly lower in the bottom two quintiles than in the upper quintiles, with the difference being particularly marked in rural areas (Figure V.5). On a

76

regional basis, the share of those seeking care in Southeastern and Eastern Anatolia i s significantly lower than in the rest o f the country (Figure V.6).

Figure V.5. Share of Those Reporting Illness Who Sought Care by Quintile and Location

100% 80%

1 60% ~ 40%

20% 0%

U% sought care rural ,

1 2 3 4 5 Per Capita Income Quintile

I

Source: 2001 HCIS

Figure V.6. Propensity to Seek Treatment (by region and location)

130% 80% 30%

0 Rural 0 Urban Region

. ~~

Source: 2001 HCIS.

Even among those who report that their illness was l i f e threatening or very serious, the share o f those seeking care remains a low 55 percent in the lowest-income group, while it i s over four-fifths in the top income group. This suggests significant access problems among the low-income groups. Those with insurance, including a green card, are significantly more likely to seek health care when ill than those without insurance, underlining the importance of insurance to improving access to health care.

Even among those who report that their illness was l i f e threatening or very serious, the share o f those seeking care remains a low 55 percent in the lowest-income group, while it i s over four-fifths in the top income group (Table V.8). This suggests significant access problems among the low-income groups. Those with insurance, including a green card, are significantly more likely to seek health care when ill than those without insurance, underlining the importance o f insurance to improving access to health care (Figure V.7).

77

Figure V.7. Propensity to Seek Care When I11 by Insurance Status

Figure V.7. Propensity to Seek Care 'VVhen 111 by Insurance status

Private

Emekli Sandigi

Eagkur

SSK

Green Card

None

0 O h 20% 40 % 60 Yo an yo 100%

Source; 2001 HCIS

Table V.8. Health Care Utilization by Severity of Illness

Life- Threatening Very Serious Serious Not Serious Total

Quintile YO Seeking Care 1 55% 66% 70% 54% 63% 2 87% 58% 72% 54% 63% 3 80% 84% 79% 72% 79% 4 83% 86% 84% 77% 79% 5 83% 89% 84% 74% 78%

Total 72% 76% 77% 67% 72% Source: 2001 HCIS

Hospital Care. Of the 552 individuals (3.6 percent o f population) who reported having suffered from an illness that required hospitalization over the past six months, only two-thirds reported that they had actually been hospitalized, with the incidence of hospitalization being inversely related to household income and to insurance status (Figure V.8). The data seem to suggest that possession o f a green card has a significant impact on access to hospital care, because there i s no marked difference in the hospitalization rate between those with insurance and those with a green card, but the share among those without any insurance protection i s 26 percentage points lower than among those with insurance or a green card.

78

Figure V.8. Hospitalization Among Those Requiring Hospitalization, by Quintile

Hospitalization among Those Requiring Hospitalization, by Quintile

Hospitalization among Those Requiring Hospitalization, by

Insurance Status 5 4 3 2 1

Quintile

’~ 0 0.2 0.4 0.6 0.8

no insurance 2 G B greencard g c - insuranw

~~~~~

7 2 t

0% 20% 40% 60% 80%

Source: 2001 HCIS.

Determinants of Care Seeking. The 2001 HCIS showed that the most important reason for not seeking outpatient care when sick, and for not seeking hospital admission when required, i s the lack of affordability (Table V.9). Close to three-quarters of those who did not seek outpatient care when ill, and a similar share of those who did not seek hospital care when needed, reported that they could not afford to do so, with the share of those not being able to afford it expectedly falling rapidly with rising income levels.

Table V.9. Reasons for Not Seeking Outpatient Care When I11 ~~ ~~

Reason for Not Poor Seeking Care Unaffordable Too Far Quality Bad Time No Doctor N o Drugs Other

Quintile 1 95% 0% 2% 0% 0% 2% 2% 2 79% 0% 0% 6% 2% 0% 13% 3 80% 0% 5% 5% 0% 0% 10% 4 32% 0% 16% 5 yo 5% 5% 3 7% 5 25% 4% 14% 14% 7% 0% 36%

Total 72% 0% 5% 5 yo 2 Yo 1 Yo 14%

Insurance Status Emekli Sandigi 17% 0% 5 0% 17% 0% 0% 17% SSK 5 1% 2% 6% 10% 4% 2% 24% Bag-kur 40% 0% 10% 0% 10% 0% 40% Private 0% 0% 0% 0% 0% 0% 100% Green Card 90% 0% 0% 0% 0% 10% 0% No insurance 85% 0% 3 yo 3 yo 0% 0% 8% Source: 2001 HCIS.

Although two-fifths of the population indicated that outpatient facilities where they seek care are far away, physical access barriers do not appear to be a key determinant of not seeking care when ill,

79

regardless of household welfare level. The fact that a significant share o f those who sought care indicated that the place were they got care was far away i s l ikely driven by people self-refening to outpatient hospital care rather than using primary care, which would be closer to their residence, but i s often perceived to be o f low quality (Table V.10).

Table V.10. Reasons for Not Being Hospitalized When Needed ~~ _ _ _ _ _ _ _ _ ~

Quintile 1 2 3 4 5 Total

Cannot Afford I t 88% 83% 75% 40% 30% 78% Too far 4% 8% 17% 0% 0% 5%

Other 3% 5% 8% 50% 53% 12% Source: 2001 HCIS.

Poor Quality 5% 4% 0% 10% 17% 5%

Information pertaining to problems that those who sought care encountered, conf i rm that affordability o f health care i s a serious issue for lower-income households. One out o f 5 people f rom the lowest income quintile who sought outpatient care reported that the main problem with the care was that it was too expensive, and another 1 out o f 10 reported that lack o f access to drugs was a problem. The share of those reporting the same problems among the top quintile, on the other hand, i s only one-fifth o f that among the bottom quintile (Table V. 1 1).

Table V.11. Problems Encountered When Seeking Outpatient Care, by Quintile

Quintile (per capita income) Nature o f Problem 1 2 3 4 5 Total

No problem Not clean Long wait No specialists Too expensive N o drugs Treatment did not work Staff was rude

46% 2%

12% 0%

20%

5% 4%

9 yo

50% 3%

20% 2%

10%

3% 6%

4 %

54% 3%

18% 2%

14% 3 yo 7% 1%

61 YO 3%

18% 1%

10% 1 Yo

2% 4%

68% 1 Yo

13% 2% 4% 2 % 6% 3 %

55% 2%

16% 1%

12%

5% 3%

4%

Other 1% 1% 0% 0% 2% 1% Source: 2001 HCIS.

The share o f the population that had to pay for outpatient treatment, drugs, and hospitalization i s consistently higher among the lowest-income quintile than among the upper-income groups-a reflection of the lower insurance coverage among low-income households. Among those who paid for outpatient care, total payments (covering consultation, drugs, and gifts to staff) were highest among the lowest- income group, and dropped with rising income and associated increased insurance coverage (Table V. 12). The situation i s less marked in the case of hospital treatments; whi le the share o f those who had to pay for hospital treatment was higher in the lowest-income groups, the average amount paid for inpatient care was lower among the lowest-income groups (Table V.13).

80

Table V.12. Average Amount Paid During Last Outpatient Treatment by Those Who Paid

Quintile Consultation Drugs Gift Total % Who Paid

1 34 24 4 62 60% 2 28 30 1 59 40% 3 27 19 3 48 35% 4 35 20 3 57 46%

Total 31 21 2 54 43% Source: 2001 HCIS.

TL Million

5 30 17 1 48 37%

Table V.13. Share and Average Amount of Payments for Last Hospital Admission

Quintile TL Million % Who Paid for Treatment

93 170 139 133 161

68% 58% 67%

66% 50%

Total 136 62% Note: Average paid i s average for those who paid only. Source: 2001 HCIS.

Multivariate analysis o f the determinants o f health-care-seeking behavior confirms that income, insurance coverage (including green card), household size, gender o f the household head, and severity o f illness are the most important determinants o f an individual’s seeking health care (see Table V.14). Together with the above information, these findings thus conf i rm that financial constraints constitute a significant access barrier to care for low-income groups, particularly those who have n o financial protection. They underscore the importance o f access to health insurance in the decision to seek health care.

Table V.14. Determinants of Health Care-Seeking Behavior, Probit Estimates (based on 2001 HCIS data)

Employed head o f household

Insurance: Emekli Sandigi 1.076 7.960 Female head o f household -0.363 -2.890

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Variable Insurance: SSK Insurance: Bag-Kur Insurance: Private Green card Severely ill Household size Constant

Bank’s Health Sector Report (2003c), particularly Chapter 2. This report also carried out a more sophisticated analysis of the determinants of health-care-seeking behaviors using a nesting logit model to predict the probability of seeking health care conditional upon reporting morbidity. The results of that analysis similarly confirmed the importance of income, insurance, household size, gender of household head, and severity o f illness as the most important determinants o f an individual’s decision to seek health care.

Coefficient t-ratio 0.671 7.570 0.683 5.590 1.261 2.110 0.618 3.670 0.598 6.520

-0.062 -3.160 0.024 0.120

Location of Care. Lower-income groups are most l ikely to seek care at MOH facilities because they can gain access to them even if they have n o insurance (or with green card coverage), and because the average cost o f treatment there i s lower than elsewhere, with the exception o f SSK and mi l i tary facilities, both o f which were, until recently, reserved for specific target groups (SSK beneficiaries and military personnel and their dependents). The upper-income groups, which are more l ikely to benefit f r om formal insurance protection (most notably SSK insurance), tend to seek care at SSK, university, and private facilities. However, a relatively important share of those in the lowest-income groups also seek care f rom private providers, suggesting that once a decision to seek care i s taken, perceived quality o f care i s an important determinant o f the location o f care seeking (Tables V.15 and V.16).30 The data also conf i rm that primary care facilities, particularly MOH ambulatories and health posts, which have been set up countrywide to provide the population with access to essential care and to serve as a f i rs t contact point, largely fa i l to do so. Almost three-quarters o f those who sought outpatient care did so at a hospital, rather than at a primary care facility, with the share o f those in lower-income groups not varying markedly f rom those in the upper-income groups. The Government’s recently introduced pol icy changes, which provide patients free choice between MOH and SSK facilities regardless o f insurance affiliation, are l ikely to change this care- seelung pattern somewhat. I t i s unlikely, however, that the distribution between private and public providers will substantially change as long as waiting times and perceived quality of care at public facilities are not improved.

30 The World Bank Turkey Health Sector Report (2003~) found that the demand for health care i s very price inelastic, even among low-income groups. Thus, once a decision to seek care i s taken, particularly b y those who have to pay for the entire cost o f care themselves, quality considerations are likely to drive care seekers to seek care from private providers that are perceived as providing higher quality o f care.

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Table V.15. Location of Outpatient Care by Quintile

Quintile (per capita income) Location of Care 1 2 3 4 5 Total

MOH Hospital 43% 38% 29% 18% 26% 31% M O H Clinic 5% 3% 4% 5% 3% 4% SSK Clinic 6% 4% 5% 9% 3 yo 5 yo SSK Hospital 13% 30% 38% 29% 29% 27% University Hospital 3% 4% 5% 11% 8% 6%

Private Clinic 6% 6% 6% 8% 13% 1% Private Hospital 11% 6% 5% 7% 8% 8% Consulting Room 8% 7% 2% 8% 7% 6% Pharmacy 0% 0% 0% 0% 1% 0% Other 4% 3% 5% 2% 2% 3% Source: 2001 HCIS.

Mil i tary Hospital 2% 0% 1% 1% 1% 1%

Table V.16. Average Amount Paid for Outpatient Treatment by Facility Type

TL million M O H Hospital 30.5 MOH Clinic 30.3 SSK Clinic 24.6 SSK Hospital 26.2 University Hospital 51.9

Private Hospital 91.5 Private Clinic 55.2 Doctor's Residence 50.4 Pharmacists 22.5 Other 61.9 Note: Payments include consultation, drugs, and gifts. Source: 2001 HCIS.

Military Hospital 3.9

Preventive Health Care. Given access barriers to health care, preventive health care is, not surprisingly, a luxury i tem in Turkey. The 2001 HCIS data show that only about 1 percent o f the three lowest-income quintiles had a checkup in the past six months, whi le this share rises to somewhat over 5 percent and under 9 percent for the top two quintiles, respectively, with litt le difference between urban and rural households. N o t surprisingly, the vast majority o f those in the bottom two quintiles indicated that they could not afford to have a checkup, whi le the main reason for not having a checkup in the top two quintiles was that there was n o need (Table V.17).

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Table V.17. Utilization of Preventive Care

1 2 3 4 5 Total % o f Population Who Had a Check-Up in Past 6 Months 1 Yo 1% 1 Yo 4% 9% 3% Reasons for Not Having a Check-Up Unaffordable 85% 80% 68% 53% 31% 64% Too Far 1% 1% 1 Yo 1% 1 Yo 1 Yo Not Time 0% 0% 1% 2% 4% 1% Not Aware o f Need 2% 3% 2% 2% 2% 2% Not Necessary 10% 15% 27% 42% 59% 30% Other 1% 0% 1% 1% 3% 1% Source: 2001 HCIS.

F. HEALTH CARE EXPENDITURE

Out-of-Pocket Payments. Household expenditure o n health care occurs in the form o f insurance contributions and direct out-of-pocket payments. The 2002 HBS provides information on the relative importance and composition o f out-of-pocket expenditures. The data suggest that households in Turkey allocate a relatively modest share o f their total expenditure to health care in the fo rm o f out-of-pocket expenditures, but this share increases with income, suggesting that health care i s considered a luxury good. The top quintile spends about twice as high a share o f total household expenditure o n health care than the lowest quintile. More important, the top quintile spends over 12 times more per capita on health care than the bottom quintile (Table V. 18).

Table V.18. Composition of Health Care Expenditure, by Expenditure Quintiles

1 2 3 4 5 Total

Per Capita Health Expenditure/month (mil TL) 1.2

OOP) Outpatient Consultation 9% Inpatient care 1% Dental Care 2% Diagnostics 1% Drugs 84%

Share o f Total Expenditure 1.7% Composition of Health Care Expenditure (YO o f total

2002

2.9 3.4 6.1 14.8 3.3 2.5% 2.2% 2.7% 3.5% 2.2%

16% 16% 20% 19% 14% 2 Yo 1% 2% 5% 2% 4% 4% 4% 9% 4% 2 Yo 3% 6% 5% 3%

73% 71% 65% 58% 74% Other Medical supplies 4% 4% 6% 5% 6% 5% 1. Total may not add up to 100 due to rounding. 2. Health care expenditures adjusted for spatial price variations. Average unadjusted out-of-pocket (OOP) amounts to about TL2.7 million per capita per month. Source: DIE 2002 HBS.

The largest share o f out-of-pocket expenditures o n health by far i s allocated to the purchase o f drugs (74 percent), with payments for outpatient consultations ranking second across a l l income levels. The share o f expenditure allocated to drugs i s negatively correlated with household income. Poorer households spend a significantly higher share o n drugs and lower shares on outpatient consultations, dental care, and diagnostics than the upper-income groups, an indication that poor households may resort to self-treatment

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when ill, rather than seek professional care. There are larger differences in the average absolute amounts spent o n a l l types o f care across income quintiles: the top quintile spends almost 12 times more o n outpatient care per capita than the bottom quintile, and almost four times more o n drugs.

Catastrophic Effect of Health Care Expenditures. The catastrophic effect o f health care expenditures can be determined by looking at the ratio o f people who spend a higher share o f total expenditures o n health care than a predetermined threshold considered to be catastrophic, and by looking at the extent to which health care expenditure shares surpass the catastrophic threshold (Wagstaff and Doorslaer 2002; Xu and others 2003). Thresholds o f 10 percent, 20 percent, and 40 percent o f a household’s non-food expenditure were considered for this analysis. Table V.19 shows that there i s o n average 10 percent o f the population that spends more than 10 percent o f non-food expenditure o n health care, with the share dropping to 0.7 percent for a threshold o f 40 percent. This compares favorably to many countries in the E C A region, and even in the EU (Xu and others 2003). The data suggest that the two-thirds o f households with insurance are indeed protected against catastrophic expenditures, whi le those without insurance often tend to forego health care altogether, and thus largely avoid catastrophic health care expenditures. There i s relatively l i tt le difference across income groups in the share o f those with catastrophic health care expenditures, though it tends to be somewhat higher among the second-lowest quintile than the rest. Comparing the poor to the non-poor, the share o f those with catastrophic expenditures i s somewhat higher among the non-poor, l ikely a reflection o f the fact that many o f the poor who do not have insurance simply forego health care. This i s also confirmed by the fact that the share of those with catastrophic expenditure shares i s not significantly higher among those without health insurance.

Table V.19. Proportion of People with Catastrophic Health Care Expenditure

10% or M o r e 20% or M o r e 40% or M o r e o f Non-Food of Non-Food of Non-Food Expenditure Expenditure Expenditure

Quintile 1 2 3 4 5

9.3% 4.2% 12.2% 5.6% 11.0% 3.5% 10.0% 3.6% 11.0% 5.0%

0.5% 1 .O% 0.1% 1.4% 1.9%

Total 10.0% 4.0% 0.7%

Poor Non-Poor

9.5% 4.3% 10.8% 4.4%

0.6% 0.8%

Insurance Status Compulsory 8.7% 3.2% 0.7% Voluntary 15.6% 6.4% 0.8% Green Card 12.9% 7.4% 0.7% None 11.6% 5.1% 0.9% Source: DIE 2002 HBS.

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Impoverishing Effects of Health Care Expenditures. T o see to what extent health care expenditures can throw people into poverty by preventing them f rom using the money spent o n health care on other essential items, poverty measures before and after health care expenditures were calculated (Table V.20).31 The results suggest that health care expenditures do not lead to a substantial increase in poverty. These results are fairly consistent across the various regions, with the impact being lowest in Southeastern Anatolia and the Black Sea, and somewhat higher in the Marmara Region. Whi le s t i l l relatively small, the poverty impact o f health care expenditure i s bigger among those with green cards and n o insurance, than among those with insurance. The relatively modest overall impact o f health care expenditures o n poverty can be explained by the fact that a significant share o f those who do not have insurance but l ive near the poverty line, simply forego health care (thus negatively affecting their health outcomes), whi le others do enjoy financial protection through insurance. An additional factor may be the existence o f informal support networks, particularly for drug expenditures whereby those covered by insurance obtain informally-paid prescriptions for uncovered members o f their extended families.

Table V.20. Impoverishing Effects of Health Care Expenditures

Pre-Payment Post-Payment Difference

Poor Extremely Poor

26.9% 27.9% 1 .O% 1.3% 1.4% 0.1%

By Region Marmara 18.8% 17.6% 1.2% Aegean 13.4% 12.9% 0.5% Mediterranean 41.6% 40.4% 1.2% Central Anatolia 26.7% 25.7% 1.1% Black Sea 26.7% 26.3% 0.4% Eastern Anatolia 48.3% 47.4% 0.9% Southeastern Anatolia 37.9% 37.5% 0.4%

By Insurance Status Compulsory 13.7% 14.4% 0.7% Voluntary 19.9% 20.0% 0.1% Green Card 65.9% 67.4% 1.5% None 43.6% 44.7% 1.2% Note: The post-payment poverty line was adjusted by the amount of health care expenditure. o f those living just at the poverty line to account for lower overall spending Source: DIE 2002 HBS.

Public Expenditure on Health Care. Public expenditure o n health care grew at an average annual rate o f 7.3 percent between 1999 and 2003 (Figure V.9). The Government’s efforts to protect social sector expenditures during the crisis years in 2001-2002 and thereafter have been reflected in an increasing share o f health care spending as a share o f GDP, and o f consolidated government spending. The public financing system o f health care i s highly fragmented and complex, mirroring fragmented service provision. The main public financiers are the Central Government (48 percent o f public health care funding in 2003), and the social security institutions (50 percent in 2003) (Figure V.10). Central Government spending i s distributed across four major areas, including health care programs and service delivery through MOH, the green card scheme, c i v i l servants health benefits, and government financing o f social health insurance schemes, when the latter run deficits. Central Government funding i s

3 ’ This follows the methodology developed by Wagstaff and van Doorslaer (2002).

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supplemented by limited funding from the provincial administrations and municipal governments, with the latter operating their own facilities in some o f the larger cities.

Figure V.9. Evolution of Public Sector Spending on Health

6.00

b 4.00

2.00

0.00

c

1999 2000 2001 2002 2003

15,000,000

10,000,000 c

5,000,000 .- - - B

'+Health - I ExpenditureslGNP

+Real Health Expenditure

Source: World Bank Staff Calculations, based on data provided by MOF and SPO.

Figure V.10. Composition of Public Sector Spending on Health, 2003

State Local Economic

Govern men

Centra I Governmen

Social Securi 48% Funds 50%

Source: World Bank Staff Calculations based on MOF, SPO figures.

The recently completed Turkey National Health Accounts Study estimates that Central Government funding accounts for somewhat over one-third o f Turkey's health care expenditure, employer contributions account for somewhat less than one-fifth, and households pay for over two-fifths through out-of-pocket payments and contributions to social insurance and private health insurance (Figure ~. i i ) .~~

32 Turkey Ministry o f Health School o f Public Health, National Health Accounts 2000, Draft Report, 2003.

87

Figure V.ll. Composition of Total Health Sector Spending (2000)

Composition of of Total Health Sector Spending [2000]

I I Central GOV

Local GOY 0 Social Security Funds 0 Private Social Insurnace

Private Health Insurance Household OOP Corporations

I Other I

Benefits incidence analysis carried out within the framework o f the National Health Accounts found that public sector spending o n health care i s skewed in favor o f the upper-income groups, particularly spending on outpatient care (Table V.21). The top quintile consumes about 23 percent o f total public spending on health care, while the lowest quintile consumes about 15 percent, with the average per capita consumption o f the top quintile being about 50 percent higher than that o f the bottom quintile. These findings are to be expected because the lower-income groups consume significantly less health care than the upper-income groups. This i s particularly the case for those among the lower-income groups without insurance protection.

Table V.21. Distribution of Public Sector Spending on Health Across Income Quintiles ~ ~~

Quintile Inpatient Outpatient Total

% o f spending accruing to quintiles

Q1 16% 15% 15% Q2 19% 16% 17% 43 20% 19% 19% 4 4 25% 26% 26% Q5 20% 24% 23% Source: Turkey M O H School o f Public Health: National Health Accounts, Draft Report, 2003.

Budgetary funds are not particularly wel l targeted toward assuring equitable access o f the entire population. Less than one-tenth o f Central Government funding goes toward the green card system, which i s aimed at facilitating lower-income group access to health care, whi le over one-fifth goes toward providing c iv i l servants with health care benefits, a population which i s traditionally not among the lowest-income groups (Figure V.12). Another fifth goes in subsidies to Bag-Kur and Emekl i Sandigi, neither o f which i s specifically targeted toward lower-income groups. Thus, overall, the relatively important public subsidies to health care are benefiting middle- and upper-income households more than the poor, who continue to face significant access barriers to health care.

88

Figure V.12. Destination of Central Government Funding for Health Care

Destination of Central Government Funding For Health Care

wealth Services Delivery

reen Card Rogram

F I V I I ServantHealh

m o v Subsidies to SSI Benefib

Source:Ministy of Health ,Turkey Nabnal Health Pccounts, Drat.Report.2003

89

CHAPTER VI: LABOR

Labor Force Participation Rate Total 56.6 57.0 56.0 52.2 54.6 54.1 53.7 52.6 52.8 52.7 49.9 49.8 49.6 Male 79.7 80.3 79.7 78.1 78.5 77.8 77.3 76.8 76.7 75.8 73.7 72.9 71.6 Female 34.2 34.1 32.7 26.8 31.3 30.9 30.6 28.8 29.3 30.0 26.6 27.1 27.9

In Turkey, as in most countries, poverty i s closely correlated with employment status and type o f job, whether formal or informal. Informally employed or casual workers have a noticeably higher rate o f poverty. In Turkey, unemployment o f the household head i s particularly associated with poverty. Education i s a key factor in explaining employment, and therefore poverty outcomes. Certain sectors o f the economy employ more poorly educated people, and poverty rates for those employed in these sectors are higher than average.

This chapter uses two sources o f information: the Labor Force Surveys (LFS) conducted by the State Inst i tute o f Statistics (DIE), and the Household Budget Survey (HBS). The Turkish LFS do not include any consumption information that can be used to determine poverty status, so any findings herein on poverty and the labor market are based on the HBS. In general, the HBS data confirm the overall trends o f the LFS, but the LFS should be viewed as definitive for measuring unemployment in Turkey, because this i s what they are designed for, as opposed to the HBS, which i s not.

A. OFFICIAL UNEMPLOYMENT AND LABOR FORCE PARTICIPATION RATES FROM THE LFS

Unemployment in Turkey was not especially high, hovering around 8 percent o f the labor force since 1990, but increased after the 2001 economic crisis (Table VI.l) and remained at about 10 percent in 2003. However, unemployment i s affected to a large extent by low levels o f labor force participation, whereby those who do not have work, typically drop out o f the labor force and, thus, are not captured in the unemployment rate figures, which are calculated as those reporting they are unemployed and looking for work, divided by the labor force. From one-fifth to one-fourth o f males aged 15 and above are not in the labor force, representing many discouraged workers.33

Table VI.1. Turkey: Unemployment Rate and Labor Force Participation Rate

11990 11991 11992 11993 11994 11995 11996 11997 11998 11999 PO00 PO01 PO02 nemployment I

Source: www:lldie.gov.trlENGLISH.

33 For DIE labor force information, note that the age l imi t o f the labor force was 12 and above for years before 2000, and was 15 and over starting with the 2000 LFS.

90

There i s n o sharp difference in unemployment rates between males and females (Figure VI.l), with the interesting result that the female unemployment rate has typically been below that o f males since 1990. However, this result i s primarily driven by the labor force participation rates. Unemployment among women i s lower since so few women are in the labor force. Under 30 percent o f women are labor force participants, and the female rate o f labor force participation in 2002 was significantly lower than in 1990. Figure VI.2 shows the l o w rate o f female labor force participation compared to the male participation rate.

Figure VI.1. Turkey: Unemployment Rate

12 0

~ 100 ,

8 0 0 Total

8 Male 6 0

4 0

2 0

* e

f 17 Female I

0 0 ~

Figure VI.2. Turkey: Labor Force Participation Rate

* e U

a'

__ +Total

+Male Female

_.

91

B. UNEMPLOYMENT AND INACTIVITY

In the 2002 HBS, 35 percent o f those aged 12 and above reported that they had worked in a paid j o b in the survey month. Of those reporting a paid job, the poverty rate was 25 percent. Another 43 percent o f those aged 12 and above reported that they did not work, but their poverty rate was essentially the same as the employed (it was 24 percent poor). The difference here i s that 22 percent o f the sample are children, and that poverty i s concentrated among families with children, as demonstrated in the poverty profi le chapter.

Turkey’s l o w rate o f labor force participation, particularly o f women, i s detailed in the Wor ld Bank’s, Labor Market Study (forthcoming), and was summarized above. The 2002 HBS results confirm these findings (Figures VI.3 and VI.4). In the 2002 H B S sample, 22 percent were children and 10 percent were adults aged 60 and above, leaving an adult population o f 68 percent. Of the adult population, about ha l f (51.2 percent) reported that they had a paid j o b in the survey month, but women accounted for only 32 percent o f a l l reporting paid jobs (adults and a few elderly).

Figure VI.3. Turkey: Adults Employed

Figure VI.4. Turkey: Adults Not Employed

0.4

69

-~ Male Female

92

Unemployment i s measured in the HBS as those who report that they did not work for income or in kind in the survey month, and that they were seelung a job. Only 7.2 percent o f those aged 12 and above reported that they were looking for a job, which again underscores the low labor force participation rate in Turkey, because those not looking for a job are not in the definition o f the labor force. Households where the head was unemployed had a poverty rate o f 35 percent compared to 26 percent poor o f households whose heads were employed. While households with unemployed heads are poorer, this relatively low difference relates mainly to the fact that so few people are loolung for work, and are thus able to be defined as unemployed, and also to the fact that only 8 percent o f households reported that the head was unemployed (by meeting the definition o f being in the labor force and looking for work).

Poor

For example, 39 percent o f those aged 12 and above reported that they were not seelung a job (Table VI.2) for a variety o f reasons ranging from factors related to age or family structure (students, housewives, elderly, family/personal reasons) to disability (disability or illness) or to seasonal employment.

Percent o i Non-Poor Percent of Valid* Population Subtotals Total

Table VI.2. Turkey: Poverty Rate of Reason for Not Seeking Job

Found a j o b but waiting 16.8 83.2 0.1 37,568 0.1 Student 24.3 75.7 25.7 6,879,196 10.1 Housewife 22.7 77.3 42.2 11.373.103 16.6

* The percent o f those who answered the question or for whom we have data. Notes: Poverty in percentages. Population Subtotals: Number o f observations. Source: DIE 2002 HBS.

Some o f these categories were associated with an elevated risk o f poverty (Figure VIS), although the categories were numerically small, such as family/personal reasons for not working, which was given by 6 percent o f the sample. Of those, however, the poverty rate was 37 percent compared to the average o f 27 percent. Disability and illness accounted for 1 and 2 percent o f the responses, but with a poverty rate o f 36 and 33 percent, respectively. However, for those very few households headed by a disabled person, almost all were poor (86 percent).34

_ _ _ _ ~

34 However, these households were only 0.3 percent of those sampled, so this number i s too l o w for robust estimation. It i s presented as indicative.

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Figure VI.5. Turkey: Poverty and Inactivity

c. QUALITY OF EMPLOYMENT

In Turkey, there i s a strong association between the type o f employment and the poverty status of the individual or household. For example, the poverty rate of those aged 12 and above who reported that their j o b was permanent employment was only 12 percent, but for those who reported their j o b as casual, the poverty rate was 44 percent (and it was 30 percent for the very few people who described their employment as temporary) (Figure VI.6). The relative r i s k o f poverty for casual w o r k was thus 3.7 times greater than for permanent employment.

Figure VI.6. Turkey: Poverty and Employment Situation

50.0 45.0 40.0 35.0

g 30.0 2 25.0

15.0 10.0 5.0 0.0

c

Poor _ _ _ _ _ _ ~ +Total Poor 2 20.0

Permanent Temporary Casual type of employment employment I work

under contract for a fixed

period ~ ~~

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In a different question o n the same theme, virtually the same percentages o f poor and non-poor were observed for casual employees and regular employees (corresponding to permanent employment) (Figure VI.7).

Figure VI.7. Turkey: Poverty and Employment Status

I I 1 50.0

45.0 ' 40.0 35.0

' 30.0 2 25.0

15.0 10.0 5.0 0.0

2 20.0

In addition, poverty rates were higher for the self-employed and unpaid family workers. Reflecting the finding o n the l o w rate o f poverty for apprentices, i t i s important to note that the poverty rate o f trade union members was only 7 percent (but only 2 percent o f those aged 12 and above reported membership), while the poverty rate o f nonmembers was 20 percent. However, only 16 percent o f the sample answered the question on trade unions, so the true rate o f poverty among non-trade-union members would be higher than the total poverty rate o f 27 percent.

Poverty is sharply associated with a lack o f registration at a social security institution. Conversely, formal employment as measured by enrollment in social security i s a strong bulwark against poverty in Turkey. I t i s important to emphasize that reliable figures o n who i s enrolled in social security are diff icult to obtain. As discussed in the health chapter, the rate o f coverage o f social security i s approximately two- thirds o f the population. In the 2002 HBS, o f those 35 percent reporting employment, about 32 percent reported enrollment in social security (about 15 percent o f those aged 12 and above). All lunds o f social security enrollees had poverty rates wel l below the total rate o f those who responded to this question (Figure VI.8).

95

Figure VI.8. Turkey: Poverty and Social Security

40.0 35.0

20.0 ' $ 15.0 I 10.0 I 5.0

; %:8

i 0.0

Of these formal jobs, the most significant in terms o f employees facing a lower r i sk o f poverty are government employment and employment in state-owned enterprises. The poverty rate o f government employees was 10 percent, and for state-owned enterprises (SOEs), i t was only 5 percent (Figure VI.9). However, i t should be emphasized that few people surveyed have such empIoyment--onIy 4 percent are government employees-and less than 1 percent o f those aged 12 and over reported working in an SOE (Table VI.3).

Figure VI.9. Turkey: Poverty and Type o f Workplace

30.0

25.0

20.0

0 Poor 2 15.0 2 +Total Poor - 10.0

5.0

0.0

U S

Private Public I State-Owned Government Enterprise

96

Table M.3. Turkey: Poverty Rate of Status of Workplace

Notes: Poverty in percentages. dat ion Subtotals: Number o f observations.

Poverty i s associated with the size o f the enterprise. People employed in enterprises o f 1 to 9 people had a poverty rate o f 30 percent, but only 7 percent o f those employed in firms employing 50 people and above were poor (Figure VI.10). Seventy percent o f respondents aged 12 and over reported that they worked in a firm o f 1 to 9 people, so the higher poverty rate for this category means that i t i s a major factor influencing the absolute number o f poor employees.

Figure VI.10. Turkey: Poverty and Size of Firm

35.0

30.0 _-- -_____ I 25.0 Poor

1 g 20.0 C +Total Poor

1 2 1 Q 15.0 n

10.0

5.0

0.0 119 10124 25/49 50 and

persons persons persons over

Another way to gauge informality i s t o look at the legal status o f the respondent’s workplace, assuming that more individually owned workplaces would be l ikely to be informal, whi le few incorporated companies would be. Using these criteria, i t i s clear that the highest poverty rate o f those aged 12 and above (3 1 percent) was found in those who reported that their workplace status was individual ownership, and the lowest poverty rate o f 6 percent pertained to incorporated companies (Table VI.4).

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Table VI.4. Turkey: Poverty Rate o f Legal Status o f Workplace

In Turkey, poverty i s associated more with lack o f work than with work. For example, the mean number o f hours worked by the poor was 43.4 per week, but by the non-poor it was 46.3 hours. The poor also seem to persist in the same low-paying jobs longer than the non-poor-mean duration o f employment was 12.9 years for the poor, but only 11.7 years for the non-poor. For the 9 percent o f the sample who reported employment o f more than 19 years, the poverty rate was essentially the same (28 percent) as the average o f 27 percent. However, the poverty rate for those in jobs less than nine years was slightly below (24 percent) the average of 27 percent, suggesting that mobi l i ty i s slightly associated with lower risk o f poverty.

D. SECTOR OF EMPLOYMENT

The largest sector in terms o f employment in Turkey i s agriculture (including forestry and hunting). Of the 35 percent aged 12 and above, fully 40 percent are engaged in agriculture (Table VIS). Agriculture i s also the sector with the highest poverty rate o f those employed in it, at 36.5 percent. The next-highest poverty rate i s that o f construction, at 36 percent, but accounting for only 5 percent o f employment, as reported in the HBS.35 T h i s latter finding i s curious because construction accounts for 4 percent o f GDP, and i s generally measured as a larger share o f employment according to labor force survey data (see Wor ld Bank, Labor Market Study, forthcoming). The poverty rate i s lowest for mining and quarrying, where it i s under 3 percent poor, but less than 1 percent o f employees are employed in that sector.

After agriculture, the other significant sectors in terms o f employment are manufacturing (15 percent), and wholesale and retail trade (14 percent), both o f which have poverty rates below the average o f 17 and 18 percent, respectively. In terms o f poverty, “other social, public, and personal services” have a higher poverty rate (30 percent) than average, but account for only 2 percent o f employment.

35 Note that according to the LFS, construction accounted for 4.5 percent o f employment in 2002 and 6.1 percent in 2003.

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Table VIS. Turkey: Poverty Rate o f Basic Code of Main Activity o f Workplace

Agriculture, Hunting, Forestry, Fishing Mining and Quarrying Manufacturing Electricitv. Gas and Water

I Percent I Population 1 Percent Poor N o n Poor of Valid* Subtotals of Total 36.5 63.5 40.5 9,786,383 14.3 2.6 97.4 0.7 168,655 0.2

16.8 83.2 15.3 3,708,013 5.4 16.6 83.4 0.5 121,490 0.2

r l

Construction Wholesale and retail trade and hotels and

35.9 64.1 5.3 I 1,280,230 1.9 19.2 80.8 17.0 4,101,936 6.0

restaurants Transportation communication and storage services Financial services and real estate

14.1 I 85.9 I 5.3 I 1,285,5531 1.9 I I

Total Not reDortin2 emdovment

lComunitv and Dersonal services I I

15.3 I 84.7 I 13.0 1 3 , 1 7 6 : 2 0 9 1 4 . 6

* The percent o f those who answered the question or for whom we have data. Notes: Number of work hours per week 4 0 . Poverty in percentages. Population Subtotals: Number of observations. Source: DIE 2002 HBS.

I

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I 44,233,8571 64.7

CHAPTER VII: SOCIAL PROTECTION

Social protection in Turkey consists primarily o f l imited formal systems o f pensions and social assistance, supplemented greatly by informal mechanisms. The role o f informal coping mechanisms, particularly interhousehold transfers o f food and other assistance, i s documented in the Wor ld Bank’s report, “Turkey: Poverty and Coping After Crises” (2003). For social insurance, the primary informal mechanism i s the extended family, with elderly members receiving significant support f rom children and other relatives. T h i s mechanism works wel l to keep most elderly f rom poverty in general, as documented in the poverty prof i le chapter, but i s under increasing pressure, particularly in urban areas (World Bank 2003b, UNDP 2003).

For social assistance, informal mechanisms are also important. In rural areas, strong social solidarity usually results in families o f the “deserving” poor (usually widows with young children) receiving informal transfers that keep them from extreme poverty. These rural ties are strong enough to extend to the urban gecekondu (slum) areas, through networks o f people f rom villages o f origin, called hemseri. Additionally, religious charity plays an important role. In qualitative interviews conducted for the Social Risk Mit igat ion Project, and in general poverty monitoring, some urban very poor reported charity, including rent-free housing in gecekondu areas.

Formal elements o f social protection in Turkey are the pension (social security) system, and the Social Assistance and Solidarity Encouragement Fund (SYDTF) and i t s affiliated 93 1 Social Assistance and Solidarity Foundations (SYDVs).

A. TURKISH PENSION SYSTEM

Turkey’s current social security system i s highly fragmented, with benefits and contributions dependent o n a person’s occupation. The bulk o f the covered labor force falls under the Social Insurance Organization (Sosyal Sigortalar Kurumu, SSK), the system that covers private sector workers and those public workers who do not qualify as c i v i l servants. C i v i l servants are covered separately under Emekl i Sandigi (ES), and the self-employed and farmers are covered by a third scheme, Bag-Kur (BK) (Box VII. 1). There i s a small noncontributory pension scheme available to those who reach age 65 and have n o means o f support. This noncontributory scheme i s administered by ES, but i s financed by general revenue transfers to ES. Finally, various groups o f workers are covered by separate occupational schemes. These usually are voluntary, and additional to the existing public schemes. However, in the case o f some banks and the Central Bank, for example, their previously existing schemes were grandfathered so that workers contribute to the separate schemes in l ieu o f contributing to the larger public schemes.

Overall, 42 percent o f the labor force i s contributing to one or the other o f the schemes, with the bulk of the coverage in SSK. Of the 42 percent o f the labor force covered, 48 percent are covered in SSK, 22 percent each in ES and in the self-employed scheme under BK, and an additional 8 percent in the farmers’ scheme under BK. The total number o f contributors to a l l schemes i s around 11 mill ion.

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Box VII.1. Parameters of the Current Pension System

SSK

Retirement age is 58160 for full and 58160 for partial retirement 7,000 days o f contribution (19.4 years) are required for full retirement Replacement rate i s 54 percent for full retirement Average earnings in whole working l i fe are considered in calculating pensions Present value o f earnings is calculated through inf lat ing each year’s earnings by associated Consumer Price Index (CPI) and gross domestic product (GDP) for the period Pensions are indexed to inf lat ion Contribution rate is 20 percent Insurable earnings are indexed to C P I and GDP.

Bag-Kur (self-employed)

Retirement age i s 58160 for full and 60/62 for partial retirement 25 years o f contribution are required for 111 retirement Replacement rate is 65 percent for full retirement Average earnings in whole working l i fe are considered in calculating pensions Present value o f earnings i s calculated through inflating each year’s earnings by associated C P I an( GDP for the period Pensions are indexed to inf lat ion Contribution rate is 20 percent Insurable earnings are indexed to C P I and GDP.

Bag-Kur (farmers)

Retirement age is 58160 for full and 60162 for partial retirement 25 years of contribution i s required for full retirement Replacement rate is 70 percent for full retirement Last income step where contributions are pa id i s considered in calculating pensions Pensions are indexed to c i v i l servant salary increases Contribution rate i s 20 percent Insurable earnings are indexed to increase in c i v i l servant salaries.

ES

Retirement age is 58160 for full and 60162 for partial retirement 25 years o f contribution i s required for full retirement Replacement rate is 75 percent for full retirement Last salary i s considered in calculating pensions Pensions are indexed to c i v i l servant salary increases Contribution rate i s 20 percent Insurable earnings are indexed to increase in c i v i l servant salaries.

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On the beneficiary side, only 29 percent o f the population over age 65 i s receiving an old-age pension f rom any o f the public schemes. Of that 29 percent, 47 percent receive pensions from SSK, 18 percent f rom ES, 30 percent f rom the self-employed scheme in Bag-Kur, and only 5 percent f rom the farmers' scheme in Bag-Kur. A total o f 1.2 mi l l ion people over age 65 are receiving old-age pensions, with about 25 percent more receiving survivor and disability pensions. The differences in distribution between beneficiaries and contributors among the schemes largely arise from evasion in Bag-Kur, where individuals frequently do not pay contributions until just before retirement, and then make a large lump- sum payment that i s supposed to represent the cumulative value o f a l l past-due contributions.

On the basis o f these statistics, one would not suspect major problems with the Turlush pension system, aside from the evasion in Bag-Kur, given that the total number o f contributors i s far larger than the pensions going to the elderly. However, in 1991, the minimum retirement age was abolished, which, coupled with short minimum contributory periods in SSK o f less than 15 years, and only slightly longer periods in ES and Bag-Kur o f 25 years for men and 20 years for women, meant that individuals were able to retire as early as age 34 in SSK, and as early as age 40 in ES and Bag-Kur. Whi le there are 1.2 mi l l ion people over age 65 receiving pensions, there are 3.1 mi l l ion people below age 65 receiving old-age pensions, with an additional 882,000 people, at a minimum, below age 65 receiving disability and survivor pensions. Age data for ES and Bag-Kur survivor pensioners do not exist, so there are probably even more young people collecting pensions.

The 1999 reform sought to remedy this problem by reestablishing a minimum retirement age. However, the reform i s to be phased in extremely slowly, with the retirement age as l o w as 38 for women and 43 for men for the f i rs t cohorts retiring after the reform. The retirement age will eventually be 60 for men and 58 for women, but these ages wil l not apply to cohorts retiring before 2034. B o t h the 1991 law and the retirement age aspect o f the 1999 reform applied to a l l three pension systems, although the impact o n SSK i s far greater than on the other systems, since i ts shorter minimum contributory period had resulted in such l o w retirement ages initially.

SSK. By far the largest system, SSK covers mostly private sector workers. Employers are required to contribute 11 percent o f wage to pensions, and employees contribute 9 percent o f wage. The total contribution for al l social programs i s 15 percent for the employee, with 5 percent for health and 1 percent for unemployment insurance, in addition to what i s paid for pensions and 21.5 percent f rom the employer who pays 6 percent for health, 1 percent for maternity, 1.5 to 7 percent for work injury, and 2 percent for unemployment insurance on top o f what i s paid for pensions (Table VII.l). Relative to even older Organisation for Economic Co-operation and Development (OECD) countries, these contribution rates are quite high. OECD average contribution rates are 19.4 percent o f wage for pension and 31.9 percent for a l l social programs, but include countries such as Canada, with rates as low as 6 percent for pensions. The average for Lat in American countries, which are closer demographically to Turkey than the older OECD countries, i s 12 percent contributions for pensions and 21.6 percent overall.

Table VII.1. Contribution Rates to SSK (including unemployment insurance premiums)

Employee Employer

Health Insurance 5% 6% Matemity 0 1% Work Injury and Occupational Diseases 0 1.5%-7%' Pension 9% 11% Unemployment Insurance2 1% 2% Total 15% 21.5% 1. The rate i s subject to risks o f injury and disease in a particular sector. 2. There i s also a 1 percent state contribution for unemployment insurance.

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The 1999 l a w changed most o f the SSK benefit parameters, but since the benefits received even by new pensioners consist o f a combination o f o ld system benefits and post-reform benefits prorated by years of service under each system, it i s necessary to describe the benefit structure both pre-reform and post- reform. Pre-reform, benefits used to be 60 percent o f the average o f salaries f rom the last f ive years plus 1 percent additional for each additional 240 days, with individuals able to retire having contributed for 5,000 days, or 13.9 years. In addition, workers were to have been members o f SSK for 25 years i f male, and 20 years if female. A second retirement option existed whereby workers who had reached age 55 for males and age 50 for females could retire with 54 percent o f last salary, with only 3,600 days o f contributions, or 10 years. Contribution ceilings and floors and maximum and minimum pensions were adjusted by Parliament in an ad hoc fashion, with some periods where the contribution ceiling actually fe l l below the minimum wage. Pensions post-retirement were adjusted by growth in c i v i l servant wages. During periods o f crisis, the adjustments could lag inflation considerably, whi le during boom periods, pensioners did quite well. In addition, in 1984, Parliament instituted a social assistance payment to a l l pensioners. The nominal amount o f this flat payment was decided annually by Parliament. By 1996, this flat payment had become so large that i t exceeded the average pension level, completely unraveling any relationship between pensions and contributions. Since 1996, this flat payment was frozen in nominal terms, and i s now only about 1 percent o f pensions, but it i s sti l l gwen to a l l pensioners, including those just retiring.

Post-reform, the requirements are a l itt le more stringent, with workers required to contribute 7,000 days, or 19.4 years, for full retirement, although this change i s also being phased in slowly for current workers. Full retirement benefits are 54 percent o f lifetime career average, although the average i s computed by revaluing the nominal wages by growth in nominal GDP. Workers are s t i l l required to belong to SSK for 25 years if male, and 20 years if female, and the new minimum retirement ages are being phased in slowly. A partial retirement option i s s t i l l available, but at the normal retirement age o f 60 for men and 58 for women, effective immediately. Workers need only 4,500 days o f contributions, or 12.5 years, under this option, and will receive 40 percent o f their career average salary with 2 percent additional up to a total o f 25 years, and 1.5 percent subsequently.

A major innovation o f the new law was the removal o f ad hoc adjustments, replaced by automatic indexation rules. The minimum salary o n which contributions were to be paid was indexed to nominal GDP growth. The maximum salary on which contributions were to be paid was set at f ive times the minimum insurable earnings (three times in the original law, but subsequently raised to five). Pensions were to be automatically indexed to inflation o n a monthly basis.

One issue that has emerged from the automatic indexation i s that a discrepancy has arisen between minimum wage and the minimum insurable earnings. Particularly since the 2001 fiscal crisis, minimum wage, which i s s t i l l adjusted o n an ad hoc basis, has not risen as fast as nominal gross national product (GNP) growth. Thus, minimum insurable earnings are almost 50 percent higher than minimum wage. Employers are currently required by l a w to pay the full contribution, both employer and employee portion, for the difference between the two. T h i s has been remedied by legislation passed in June 2004 that makes the minimum insurable earnings equal to minimum wage, and the ceiling equal to 6.5 times minimum wage, to leave it at i t s previous level.

Bag-Kur. Bag-Kur primarily covers the self-employed and some farmers. Contribution rates are 20 percent for pensions and 20 percent for health coverage. As with a l l systems that cover the self- employed, there i s the perennial problem o f evaluating the income earned. Turkey initiated a system of minimum earnings steps that are attributed to individuals regardless o f what they actually earn. Most people declare earning level 1 in their f i rs t year o f contribution, and are automatically raised to the next level the following year. T h i s occurs for the f i rs t 12 years. Subsequently, automatic increases occur only

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every two years. Workers o f course have the freedom to declare a higher earning level anytime they choose. The income levels associated with each step are different for the self-employed and for farmers, with farmers’ income substantially below that o f the self-employed. Pr ior to the reform, there were only 12 steps, with automatic increases in the first six years, and then only at the worker’s discretion beyond that. The nominal earnings level associated with each step i s now also automatically indexed to nominal GDP growth.

However, i t should be noted that Bag-Kur has very l o w collection rates for its contribution revenue. Typically, workers pay very l itt le i f anything during their working years. Just pr ior t o retirement, they pay Bag-Kur a lump sum equivalent to the past-due contributions, with interest, and then receive their retirement.

Prior to reform, Bag-Kur maintained the same benefit structure for the self-employed and for farmers, with each getting 70 percent o f the last earning step after 25 years o f service at any age, and 60 percent o f the last earning step after 15 years o f service at age 55 for males and age 50 for females. Pensions were indexed by growth in c iv i l servant wages. A flat social assistance payment was provided in Bag-Kur as well, but i ts nominal amount had been frozen early o n and only rose br ief ly in 1995 and 1996 before being frozen permanently.

The reform affected the benefit structure for only the self-employed. The farmers were allowed to retain their previous structure, but with retirement ages imposed. The self-employed benefit structure became identical to that o f SSK, with individuals receiving 65 percent for 25 years o f service and 45 percent for 15 years o f service. Pensions were based o n the full earnings history (as defined by the steps). Pensions were also n o w automatically indexed to inflation o n a monthly basis. As with SSK, the earnings steps are rising with nominal GNP growth, which exceeds the rate o f wage growth, potentially causing difficulties for workers who try to comply with the system.

Emekli Sandigi. Emekli Sandigi i s the program that covers c iv i l servants, including mi l i tary personnel. The financing o f Emekli Sandigi i s somewhat different f rom the other plans in that health insurance during working years i s not covered by the pension fund. Rather, i t i s covered directly by the l ine ministries with which the c i v i l servants are employed. The pension fund covers only retirement age benefits, pensions, and health services during retirement. For this, a 36 percent contribution i s collected, of which 20 percent comes f rom the employer and 16 percent f rom the employee. No distinction i s made between revenue for health or for pensions, but in 2003, about 30 percent o f expenditure came f rom provision o f health services, and 70 percent was derived directly f rom pensions, suggesting that about 26 points o f the 36 percent contribution finance pensions, with the rest financing health. Another distinction between Emekl i Sandigi and the other schemes i s that the basis for contributions and the basis for benefits are different. Contributions are paid o n the basis o f basic salary. Depending on the grade o f the worker, this basic salary may represent as l itt le as 60 percent o f the worker’s total cash remuneration. When pension benefits are paid, they are paid o n the full remuneration, including a l l the bonuses, and so forth. Thus, from the init ial design, there i s both a financing gap in EmeMi Sandigi and an equity issue, whereby lower-grade workers pay contributions o n a larger share o f their salary than higher-grade workers.

Whi le the retirement age change includes c i v i l servants, the 1999 law otherwise lef t c i v i l servants untouched. Their benefit as always i s 75 percent o f last salary, based o n al l remuneration, with increases after retirement indexed to growth in c i v i l servant wages. In fact, it i s slightly more generous than that. If a worker retires f rom a particular grade, his or her pension i s t ied to the growth in salary for that job. The retirement age change has had almost n o impact yet because c iv i l servants had to work a minimum o f 25 years for a man and 20 years for a woman before collecting a pension. Since the legal retirement age i s currently about 43 for a man and 40 for a woman, with the very slow phase-in period, virtually no one i s affected by the change yet.

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Noncontributory pension benefits. Turkey also provides a small noncontributory benefit to those over age 65 who earn below the level o f the benefit. Currently, Emekl i Sandigi pays 1,050,852 noncontributory pensions, o f which 207,578 are elderly men (over 65), 424,623 are elderly women, and 139,046 are elderly couples. In addition, 48,554 men over age 18 with 70 percent or more disability receive benefits, as do 24,082 women and 908 couples in the same group. Finally, 136,949 men over age 18 with disability o f 40 to 70 percent receive it, as do 61,313 women and 7,799 couples. The amount as of March 2004 was TL 54.63 mi l l ion per month for a single person, and TL 81.945 m i l l i on (50 percent more) for a couple. The amount i s paid quarterly through banks if in urban areas, but through the Postal Telephone & Telegraph (PTT) system if in rural areas. The amount was init ially two-thirds o f minimum wage, but i s n o w about one-sixth. In addition, the person receives an identification card that provides outpatient care at state hospitals, but n o medicines. Inpatient care i s provided by the hospital itself. The pension i s exempt f rom a l l taxes.

Eligibility i s o n the basis o f need as defined by L a w 2022 passed in 1976 and enacted in 1977. People have to apply through the district administrative council where their birth record i s registered. They can do so by mail. A six-person board decides whether the applicant i s needy. Fo r the disabled, a health board of three physicians determines whether the person i s truly disabled. Bo th property and income are counted, but primarily property that generates income. For elderly living with younger family members, the income o f the son or daughter i s taken into consideration. If the son or daughter can afford to give the parent the equivalent o f the benefit, the parent will not receive it. If people are receiving the pension amount in other income, they will not be considered needy. If they receive even 1 l i ra less, they will receive the full amount f rom Emekl i Sandigi.

There are poor people who choose not to apply. One reason i s that they prefer t o qualify under SSK or Bag-Kur if they have a son or daughter working, because they can get health benefits with pharmaceutical coverage under SSK. But they have to give them up if they qualify under Emekl i Sandigi. When a person receives the pension, his or her birth office i s notif ied and automatically informs Emekl i Sandigi o f death, since that also i s registered at the birth office. There i s some crosschecking with SSK and Bag- Kur databases to verify that the individual i s not receiving a pension f rom one o f those systems. Budget issues do not impact how many people are paid; if they qualify, they are paid.

Issues in Turkish Pensions. The obvious main issue in the Turkish pension system i s i ts lack o f fiscal sustainability. Figure VII.l shows the fiscal situation o f the pension system, with overall deficits projected to be 4.5 percent o f GNP in 2004, after having hit a l o w o f 2.57 percent o f GNP in 2000.

Figure VII.1. Budgetary Transfers to Social Security Institutions

% of GNP 1

1994 1996 1998 2000 2002

&SSK + Bag-Kur -&-- Emekli Sandigt --rc-Total

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While SSK i s st i l l slightly below its pre-reform deficit, the large growth in deficits comes f rom Emekl i Sandigi, which as noted, had made few changes in i t s pol icy since the 1999 reform. Whi le the picture improves somewhat as the slow retirement age i s phased in, the increases in l i fe expectancy in Turkey overcome the pace o f reform and, in the long term, the deficits increase to 7 percent o f GDP.

But along with the unsustainability o f the pension system i s the v iew that pensions are quite meager in Turkey. Whi le seeming to be a contradiction with unsustainability, the system provides incentives that encourage individuals to contribute for too few years, and to retire early, so that a small pension i s provided to many people, rather than focusing o n those unable to work due to age or disability. As a result, most younger retirees continue to work while collecting a pension, and then feel the loss o f the work income when they truly retire. L i f e expectancy at retirement i s about 28 years for men and 34 years for women. Thus, the men and women who are currently retiring f rom SSK with 15 to 17 years o f contributions, can be spending almost twice as much time collecting pensions as they do contributing to them. Obviously, a system cannot work this way. Usually pension systems count on contributions f rom a large group o f contributors to sustain a small group o f beneficiaries. In SSK, there are not even two contributors per beneficiary, and the other systems are even worse. Since most o f the younger retirees work, but do not pay contributions, the practice o f work without contributions has become ingrained in Turkish society.

Whi le the retirement age issue i s being addressed in the 1999 reform, although at a very slow pace, the number o f years required to collect a pension i s rising f rom 15 years to only 19.4 years. Even at that rate, people will spend as much time or more in retirement as in working and contributing. In most countries, people contribute twice or three times as long as they collect benefits, so the Turkish situation i s quite abnormal. On top o f that, the benefit i s front-loaded. Workers in SSK receive 35 percent for the f i rs t 10 years o f service-3.5 percent per year. This drops to 2 percent for the next 15 years o f service, resulting in workers who retire with 19 years o f service collecting a benefit equal to 53 percent o f their average salary. If they work an additional year, they get only 55 percent. It i s not worth the effort for the worker. And if the worker works beyond 25 years, the additional benefit accrual drops to 1.5 percent, removing any incentive for workers to continue contributing beyond 25 years. This needs to be compared with workers in other countries who regularly accrue 35 to 45 years o f service. As a result, even as the retirement age increases, workers are going to choose to evade a large part o f their working career to avoid the fairly high employee contributions (21 percent), and the culture o f workers a l l contributing never gets established. Benefit systems usually pay 1 to 2 percent, closer to 1 percent per year o f service. Even if people are allowed to retire with 20 years o f service, if their benefit i s only 20 percent o f average salary, they might think twice about retiring as early as possible.

Along the same lines, the target replacement rate for 25 years o f work in Turkey i s 65 percent o f salary. The International Labor Organization (ILO) targets 40 percent replacement after 30 years o f contributions. Thus, by intemational standards the pension system in Turkey appears to be overly generous. Comparing Turkish workers with Turlush pensioners, out of a salary of 100 percent o f gross wage, workers pay 9 percent for pensions, 5 percent for health insurance, and 1 percent for unemployment insurance. Minimum-wage workers pay in addition 15 percent o f salary for income taxes, with higher rates on higher-income workers. Thus, the take-home salary o f a worker i s only 70 percent o f gross wage. If the pension, which i s not subject to income tax, i s 65 percent o f gross salary, workers in retirement receive 93 percent o f their take-home salary. During working years, workers usually support children, and perhaps parents. During retirement years, they usually support only themselves, so they require less income. Other expenses, l ike commuting and work clothes, also fa l l in retirement. Thus, pensions seem overly generous, by both Turlush and intemational standards.

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The one issue that i s consistent with both the perception o f l o w pensions and the generosity o f the system i s under-reporting o f earnings. More than 50 percent o f workers in SSK report the minimum insurable earnings. In Bag-Kur, through the step system, workers cannot declare the same level o f earnings year after year, but no one voluntarily declares higher earnings than required. If workers are in fact earning substantially more, but together with their employers are under-declaring their earnings, they wil l o f course end up with l o w pensions. The current system appears to reward this behavior by awarding large pensions for minimum years o f service. In addition, periodically, the Government grants additional social support payments to pensioners, which are flat amounts per pensioner. Despite the 1999 law, the Government did this in 2003, which raises the level o f pensions to acceptable levels without raising contributions, and sends the message to workers that it i s acceptable to under-declare earnings. Pensions will be provided at a reasonable level through the polit ical process in any case.

Related to this i s the level o f contributions. The overall labor charges are 36.5 percent of the wage bill. I t i s no wonder that workers and employers choose to evade. But as a result o f this evasion, the pension system i s not able to fulfill i t s primary role, which i s to replace a worker’s income during retirement. Workers then look to the political process to deliver on income replacement, which further undermines the system.

Finally, it has to be noted that given the large segments o f the population not receiving pensions, fiscal resources spent to bai l out the pension system, which covers primarily upper- and middle-income individuals, end up with a regressive impact o n the overall distribution o f income, with resources drawn from a broader tax base being used to support pensions for a narrower tax base. Ideally, a pension system with less than full coverage should be fiscally sustainable through employee and employer contributions alone.

Whi le the Turkish pension system may fulfill the role o f reducing poverty in o ld age to a l imi ted extent, the above discussion should make clear that the system has significant problems that prevent i t f rom playing an even more constructive role. The Government i s in the process o f unifying a l l the pension systems, and in doing so reviewing the parameters that would apply to the new uni f ied system. This process provides an opportunity for improving the system by removing some of i t s more severe flaws.

B. SOCIAL SOLIDARITY FUND

The Social Assistance and Solidarity Encouragement Fund (SYDTF) was established in 1986 as an umbrella organization and financing entity for 93 1 regional affiliate Foundations (under L a w No. 3294, which entered into effect o n M a y 14, 1986). The Foundations are called vakzjZar in Turkish and in acronym, SYDVs. The purpose o f the SYDTF was defined as, “TO aid poor and destitute citizens in circumstances o f need and, as necessary, those who have been accepted in Turkey or have traveled here by whatever means, to ensure the distribution o f wealth in an equitable fashion by taking measures to improve social justice and to encourage social assistance and solidarity.” The Committee o f the SYDTF i s made up o f a Prime Ministry Undersecretary, an Interior Ministry Undersecretary, a Health Ministry Undersecretary, and the General Director o f Foundations under the chairmanship o f a State Minister appointed by the Prime Minister. Decisions o f the Committee enter into effect upon their ratification by the Prime Minister. The Fund Administration carries out i t s services through the 931 local Social Assistance and Solidarity Foundations established throughout Turkey under the chairmanship o f Provincial and Sub-Provincial Governors.

The SYDTF i s an extrabudgetary fund financed by earmarked taxes and administered by a Cabinet Minister. The regional affiliate foundations provide a variety o f social assistance programs (usually in

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kind) to the needy. The needy are determined at the discretion o f the regional affiliates. The SYDTF, together with i ts local affiliates, i s the largest social assistance program in Turkey in terms o f number o f beneficiaries (4.2 mi l l ion f rom July 1, 1997 through March 26, 1999).36 The type o f assistance provided by the SYDTF and i t s regional affiliates i s shown in Table VII.2. Project assistance refers to employment-generating projects, shown in Table VII.3. General revenues and expenditures are presented in Tables VII.4 and VIIS.

Table V11.2. Types of SYDTF Assistance, July 1,1997-March 26,1999 (in trillion TL)

Other 1.3 1 Total 128.4 100 4,232,022 --- = Not available. Source: Cumhuriyet hukumetleri doneminde soysal hizmetler, ozurluler ve sosyal yardimlar. Ankara: Nisan, 1999.

36 Turkey also has a program o f Old Age and Disability assistance formulated under Law 2022, which provides benefits to the elderly aged 65 and above, and to those who are more than “40 percent” disabled, discussed in the pension section. In September 1998, there were over 900,000 beneficiaries, 80 percent o f whom were elderly and 20 percent o f whom were disabled (World Bank 1999 Living Standards Assessment).

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Table VII.3. SYDTF Employment-Generating Project Assistance, July 1, 1997-March 26, 1999 (million TL)

Type of Assistance

Greenhouse Poultry Carpedtapestry Confection Smal l handicrafts Milk Fishery Beekeeping Growing h i t s Cow breeding Sheep breeding Miscellaneous Disabled people Starting own business Growing vineyard Growing plants Culture mushrooms TOTAL

Amount Share No. of People (percent)

2,467,5 17 16.34 9,857 3 15,03 1 61 1,328 469,350 55,865

1,171,004 206,175

1,436,048 898,051

3,634,746 237 1,015

512,043 12 1,480 69,740

175,039 239,190 15 1,865

15,105,487

2.09 4.05 3.1 1 0.37 7.75 1.36 9.5 1 5.95

24.06 17.02 3.39 0.80 0.46 1.16 1.58 1.01 100

27,656 16,598 2,500

449 1 1,345

587 4,957

36,943 13,434 11,873 12,688

979 185

1,434 9,602

672 16 1,759

Central Social Solidarity Fund revenues are comprised o f 0

0

0

0

0

0 Other income.

A 10 percent sum to be transferred from funds that exist or are to be established by statute or decree with the force o f law under the Decision o f the Council o f Ministers Payments inserted into the budget Ha l f the revenue o f fines for motoring offenses A 2.8 percent share o f the total payments made by income and corporation taxpayers A 15 percent share to be transferred from Turlush Radio and Television's advertising income All types of donations and assistance from outside

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Table VII.4. SYDTF Revenues

Loan Account o f World Bank Other Income Total income

Fuel consumption tax )229,000[ 0) 0 F r o m national budget 01 01 01 0 t230,OOO

0 0 0 3,313 7,803 17,114 102,050 2,090 4,380 9,155

454,7241519,627 841,698 890,217 826,583

Incomes o f previous years I505,000[ 7,7951 2,0941 1,8381 1,303 I I I I I

1999 2000 2001 2002 2003

Source: SYDTF

Table VIIS. SYDTF Expenditures

Source: SYDTF.

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Local Social Solidarity Foundations. The Social Assistance and Solidarity Foundations (SYDVs) established in the provinces and sub-provinces are legal entities governed by specific law. The chairpersons o f the local SYDVs are senior local government officials.

The Board o f Trustees, which i s chaired in provinces by the Provincial Governor, and in sub-provinces by the Sub-Provincial Govemor, i s composed in provinces o f the Municipal Mayor, the Security Director, the Provincial Head of Finance, the Provincial Director o f National Education, the Provincial Health Director, the Provincial Director o f Social Services and Child Care, and the Provincial Director o f Religious Affairs. In the sub-provinces, i t i s composed o f the Municipal Mayor, the senior security officer of the sub province, the Finance Director, the Sub-Provincial Director o f National Education, the senior Health Ministry official o f the sub province, and the Sub-provincial Director o f Religious Affairs. For each period o f activity, three members o f the Administrative Committee are appointed by the Provincial Governor from among philanthropic citizens. The implementation o f assistance programs in the provinces and sub-provinces enters into effect through the decision o f the Board o f Trustees. The staff working within the Foundations are appointed by the Board o f Trustees in accordance with Labor LawNo. 1475.

Each Foundation has a separate legal entity and no hierarchical connection with the central Fund Administration. Foundations are independent in their decision-making.

Taking into consideration the population structure o f the province and sub-province, the socioeconomic development index, and other social factors, each month resources are transferred to the Social Assistance and Solidarity Foundations (SYDVs) in the provinces and sub-provinces to meet the daily needs (for foodstuffs, clothing, housing, health, fuel, and so forth) o f economically and socially deprived people and families.

Support i s provided for business establishment, occupational training, and employment projects (in fields such as beekeeping, fruit cultivation, hothouse cultivation, carpet and rug malung, and handicrafts) directed toward bringing people and families who are unable to participate in production by reason of economic deprivation to a state in which they can do so.

The medical expenses (for medicine) o f outpatients with green cards who are unable to meet health expenditures from their own means, and the costs o f medicine and treatment o f patients not covered by social insurance, are met by the SYDTF. In addition, al l types o f equipment needs o f physically handicapped people (for hearing aids, prostheses, wheelchairs, and so forth) fall within the scope o f health assistance.

Social assistance to destitute citizens who suffer losses due to natural disaster, fire, and terrorism, and social support programs encompassing the provision o f fuel, clothing, foodstuffs, and housing aid, are implemented. Funds are transferred to all the SYDVs at the start o f the winter season for fuel, at the start of the school year for education, and before religious festivals for foodstuffs and clothing. Soup kitchens are opened in areas o f intensive migration, and where there i s obvious unemployment and poverty,

As a new element under eight-year basic education, in order to make a contribution to the fundamental problems such as those o f accommodation o f and food for needy students who travel to the centers where schools are located in the implementation o f education requiring transportation, funds are transferred for the purpose o f providing these students with a mid-day meal. The assistance i s passed on through the SYDVs.

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For the purpose o f solving the accommodation problems o f students in middle-school education, an educational service i s provided in various provinces and sub-provinces by constructing middle-school student hostels. With contributions provided from the SYDTF, the SYDVs have provided funds for both the construction and furnishing and decorating o f hostels, thus assuming an important responsibility within the education system. The scholarship program for young people in universities has continued from 1989 to the present.

Contributions are also made by the SYDTF to orphanages, old people’s homes, and rehabilitation centers aimed at the accommodation and rehabilitation o f the weak and destitute.

C. CONDITIONAL CASH TRANSFERS

Turkey’s social assistance system, provided by the SYDVs with financing from the SYDTF, recently underwent an important innovation. Under a loan financed by the World Bank (the Social Risk Mitigation Project, SRMP), Turkey began a national program o f conditional cash transfers (CCTs). CCTs are payments made to the mothers o f poor children, provided that they attend school or health clinics (Table VII.6). CCTs have proved to be highly effective in raising the enrollment rates o f girls in secondary school in Mexico, and in increasing attendance in general. There are large CCT programs in Latin America-the largest i s in Brazil, followed by World Bank-supported programs in Colombia and several other Latin American countries. Turkey i s the first country in Europe to have adopted CCTs as a formal program supported by the Bank, although the social protection systems in most European countries provide for child allowances, often conditioned, as in France and Hungary, on school attendance.

CCTs are an important tool in the arsenal o f poverty-fighting interventions in Turkey. They are targeted to the poorest o f the poor, many o f whom stated in qualitative interviews that they would not be able to afford the out-of-pocket expenses o f sending their children to school. The State Minister for the SYDTF and SYDVs, and the Ministr ies o f Education and Health, view CCTs as an important intervention that wil l help Turkey achieve multiple objectives: amelioration o f extreme poverty; secondary school enrollment o f girls; improved health care access for poor children, including immunization in urban areas (rates are high in rural areas); and improved prenatal care (pregnant women are to be included in the program shortly, as i s the case in Jamaica and other Latin American countries). Secondary benefits include improvement o f the registry for national identification numbers and the registration o f births and marriages.

As of May 2005, there were 601,400 eligible families, with 1,627,000 child beneficiaries. The CCT program was fully operational across Turkey in 2004. A national evaluation o f the effectiveness o f the CCT program will be undertaken.

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Table VII.6. Quarterly Figures for CCT

NUMBER OF BENEFICIARIES

EDUCATION HEALTH TOTAL

PAYMENTS

EDUCATION HEALTH TOTAL

2003

4 2 11,233 6,625 17,858 13 5,05 3 79,65 1 214,704

4 3 25,697 14,647 40,344 233,934 180,228 4 14,162

Q4 59,206 28,027 87,233 73 1,472 294,2 18 1,025,690

Q1

4 2 2004

D. LOCAL INITIATIVES

225,324 87,919 3 13,243 3,194,2 14 847,457 4,041,671

305,666 113,103 418,769 3,979,778 1,389,752 5,369,530

Supported under the SRMP, the Government o f Turkey has undertaken a significant expansion o f the microprojects traditionally done by the SYDVs with approval f rom the SYDTF, along with a sharpening of procedures. In 2004, 250,000 people will benefit f rom income generation, employment, and social service opportunities under the SRMP Local Initiatives component, which seeks to provide these people with sustainable livelihoods, thereby lifting them permanently out o f poverty.

Figures for number o f beneficiaries are cumulative. Payment amounts are not cumulative.

Q1 includes January and March figures. 42 includes May figures. 43 includes July and September figures. 44 includes November figures. Source: SRMP Project Coordinating Unit.

Incidence of Government Programs

Unfortunately, the 2002 HBS questionnaire was not wel l designed to capture information about government social protection program receipt. For example, there i s a question asking, “Do you receive any transfers f rom persons (neighbor, relative, etc.) or foundations (SYDVs)?” but this question i s not further subdivided, so government programs cannot be analyzed separately f rom private charity or transfers. Whi le there are detailed questions about transfers in kind in which government programs can be separated from private programs, this i s not the case for cash, which i s the predominant form o f government social assistance. And, unfortunately, in the income section, again public and private sources of cash transfers are either confounded, or questions about monetary a id f rom the SYDVs were simply not asked, Given the absence o f detailed questions on cash assistance f rom the SYDVs, the incidence of spending from other government programs i s presented in Table VII.7. All government transfers except old-age income and transfers in kind are regressive. This analysis i s based o n nominal transfers reported on an annual basis. I t i s not clear how best to deflate these data, since respondents were asked to report their annual income by type, so it i s not clear what reference period would pertain.

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Table VII.7. Turkey: Incidence of Nominal Transfers (annual, undeflated)

institutions in the last 12 months 14,024,605 1 11,869,626 I 27.99

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ANNEX I: METHODOLOGY

This appendix summarizes the methodological approaches used to analyze poverty and inequality in the Joint Poverty Assessment Report for Turkey. This methodology was approved at the World Bank Concept Paper Review meeting, and i s presented here in greater detail. The source o f data i s the 2002 Household Budget Survey (HBS) data o f the State Institute o f Statistics (Devlet Istatistik Enstitusu, DIE). The methodology i s well established in the poverty literature and in World Bank research and operational policies (Coudouel and Hentschel 2000; Deaton 1997; Deaton and Zaidi 2002; Foster, Greer, and Thorbecke 1984; Lanjouw and Ravallion 1995; Ravallion 1992, 1994, 1998, 2000; World Bank 1990, 2001). First, a welfare indicator must be devised from the data, then analytic choices must be made about how to distribute that welfare level across household members, and finally, poverty lines must be established and applied to the data.

Indicators of Well-Being

Two measures o f economic welfare are constructed in this report4onsumption expenditure and income-although our preferred measure o f welfare i s consumption expenditure. It should also be stated that income and expenditure aggregates are very well correlated, and in principle the income aggregate could also be used for the poverty and inequality analysis. However, there are several arguments for using consumption as the welfare indicator, as i s standard World Bank practice. For Turkey, i t should be noted that an extensive informal sector and flows o f private remittances, coupled with a low level o f tax declaration compliance and enforcement, make money income an inferior measurement o f household welfare. In addition, a very important source o f food for not only rural households, but also many urban households in the gecekondu areas, i s food produced in garden plots, including both crops and livestock.

Consumption Aggregate

The consumption aggregate constructed from the 2002 HBS data set follows standard practices as well established in the literature (Deaton 1980; Deaton and Zaidi 2002). This consumption aggregate will be referred to as the “new” methodology, and draws most from Deaton and Zaidi (2002). A version o f the consumption aggregate for 2002 was also constructed with exactly the same algorithm used in the previous World Bank poverty assessment. This consumption aggregate will be referred to as the “previous” methodology. Drawing this distinction i s very important, because the poverty and inequality findings will differ depending on which consumption aggregate i s used. In particular, the previous methodology included expenditures on consumer durables which, following Deaton and Zaidi (2002), have been excluded from the new methodology. The previous methodology did not include the imputed value o f owner-occupied housing in the consumption aggregate.

New Methodology

The 2002 HBS data were used to construct the consumption aggregate. Food consumption includes expenditures on food, consumption o f home-produced food, and food received as a gift. Consumption o f non-food items includes expenditures on personal care and hygiene items, clothing, utilities, transportation, and other frequently or not-so-frequently purchased non-food items, and the estimated value of services rendered by durables. The expenditures on durables are excluded from the consumption aggregate. The definition o f durable goods i s made according to the Classification o f Individual Consumption According to Purpose (COICOP). The purchase o f semidurable goods and services i s included in the consumption aggregate. The information on the reported current value o f each durable

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i tem owned by a household was not available, nor was the age or purchase price o f the durable item. That i s why the imputed or reported value o f durable goods i s not included in the consumption aggregate.

The housing rental market i s wel l developed in Turkey (according to the 2002 HBS data set, 20.2 percent of households were renting their housing), malung it possible to apply hedonic housing regressions in a meaningful way to derive the estimates o f the rental value o f housing.

The consumption aggregate does include a monetary assessment o f the value o f consumption received by the household f rom occupying i ts own dwelling. The significant share o f households paying rent makes possible the imputation o f the value o f owner-occupied housing. B o t h methodologies, previous and new, include the self-reported monthly rent, but the new one includes the imputed value o f owner-occupied housing, where this imputation i s done by a semi-log regression o f monthly rent on housing attributes, and then the regression coefficients were used to impute rent based o n the characteristics o f owner- occupied housing.

Income Aggregate

The household income aggregate was constructed using the income section o f the HBS. The information on income i s collected o n a monthly basis for the survey month, and on a yearly basis (the income o f the household for the last 12 months). Total household income includes market incomes, public and private transfers, and imputed value o f home-produced goods. Market incomes include salaries in cash and in kind, net income from self-employment (including in agriculture), and capital income. Public transfers include pensions, stipends, unemployment benefits, social assistance, and other social insurance benefits. Private transfers include financial assistance from relatives living in country and remittances from abroad.

Methodology of Making Household Welfare Indicators Comparable

Ranking households according to their welfare, and ranking them below or above a single national level poverty line, requires some adjustments for prices with the nominal welfare measures o f households, such as income or consumption. This adjustment i s necessary because a l l households were not interviewed in a single month. Rather, interviews were done across the 12 months o f 2002, with approximately one- twelfth o f the total sample o f 9,555 interviewed in each month. Inflation was significant in Turkey, averaging 29.7 percent during 2002.

Turkey i s a country with significant differences in consumer prices across the regions, and considerable urbadrural differences. Therefore, to make household welfare comparisons, accounting for price differences using three-dimensional price indexes by regions, type o f settlement, and months i s one of the possible solutions to deflate the nominal welfare measures for the different times and areas, and to make households comparable to each other and to any single national poverty line. Thus, real consumption can be compared to a single poverty line.37

37 The alternative approach to the solution o f the problem o f nominal values needing to be deflated i s to set up different poverty l ines for households based on region, settlement type, and month, so that nominal consumption would be compared to nominal poverty lines. Comparison o f the nominal per capita or per adult equivalent measures with deflated poverty l ines would give a correct picture o f poverty, but in this case, the nominal welfare measures o f households surveyed in different regions and urbadrural localities during different survey months would not be comparable to each other, and therefore could not serve as a base, for instance, for the analysis o f inequality. As a result, this second approach i s not used in this report.

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Household consumption and income, as well as other monetary measures, were deflated using three- dimensional price indexes. There are two choices for which price index to use: one calculated f rom inside the survey database, and one from another source o f information, namely the DIE price statistics department.

The DIE off ic ia l Consumer Price Index (CPI), based on both food and non-food items, 2002 price differences across regions, urbadrural location, and months were provided by DIE. The average CPI for Turkey for 2002 i s taken as a base, and i s set equal to 1.00. The official CPI varies across a l l three dimensions: regions, urbadrural location, and months. The total number o f CPI i s equal t o 168 (7 regions times 2 settlement types times 12 months).

However, it i s more preferable to use a price index from inside the survey database, based on survey prices, because a l l other information used for the poverty analysis i s based o n survey estimates, and introducing another data source could lead to bias (Glewwe and H a l l 1992). The survey food price index was estimated based on price differences o f food across regions, urbadrural location, and months. An appropriate price index for non-food items appears to be impossible to develop o n the basis o f survey information, because o f the insufficient number o f purchases o f such items in terms o f providing statistical significance.

A sensitivity analysis o f poverty depending on the price index used for deflation (that is, survey price index or official CPI) was undertaken. The results are different, but they are very close. There i s n o significant difference between the poverty figures based o n deflation by these two different price indexes. Appendix 3 contains the findings o f the sensitivity analysis.

Using Equivalent Measures

T o make welfare comparisons across households with different demographic compositions, some way i s needed o f adjusting the welfare measures to account for different sizes and compositions o f households, Simply dividing household consumption by the number o f members (per capita consumption) leads to overstatement o f poverty among large households (Ravallion and Lanjouw 1995). The basic idea behind equivalence i s that household members are not alike, so using per capita as average consumption per member obscures the fact that children need less food than adults, and adult males typically have expenditures relating to employment (like clothing and commuting) that elderly females do not, for example. T o take into account these differences, equivalence scales have been proposed. An example scale would be one in which children are counted as 50 percent o f adult male consumption, females and elderly are 70 percent o f adult male consumption, and the adult male i s the reference adult. To illustrate, a 5-member family with 2 children and 1 grandparent and 2 parents would have an equivalent household size not o f 5 (which i s per capita), but o f 3.4 (1 for the male plus .5 for each chi ld and .7 for the female and elderly).

For many years, the so-called Engels approach (Deaton and Muellbauer 1980, 1986) was used to estimate equivalence from survey data. However, Deaton has since demonstrated that this approach i s not correct (Deaton and Paxon 1998). Since then, the literature has not revealed an empirical way to estimate equivalence. However, several normative equivalence scales (which are not empirically verifiable) have come into common use, including one used by the Organization o f Economic Co-operation and Development (OECD) for i t s income-based poverty comparisons, and one from the United Nations Food and Agricultural Office (FAO) based o n dietary information.

I17

Various equivalent measures for income and consumption are considered in this appendix. Different scales can have major impacts on poverty measurement and the profile of the poor (Lanjouw, Milanovic, and Patemostro 1998).

Adult Equivalent Size General Formula

To measure the effects o f economies o f scale and the different consumption needs by different household members, household size i s converted into aduZt equivalent (AE) using the following formula for the household i :

where Ai i s the number o f adults in the household, Ci i s the number o f children, and a and 6’ are parameters. Children are individuals aged 14 and below. In this appendix a value o f e= 0.6 was adopted to ensure comparability with other World Bank regional poverty findings. Two different values o f a were considered in this analysis (a = 0.9 and a = 1). The batch mode programs developed for the analysis allowed examination of the impact o f other possible values o f the parameters on the poverty statistics.

Adjusted Adult Equivalent Size Based on Modal Household Composition

However, as pointed out by Deaton and Zaidi (2002), this adjustment would overestimate the total consumption unless all households were single-adult households. They suggest using an adjusted adult equivalent size o f the household using the formula shown below.

Adjusted adult equivalent size o f the household i (AE-ADJ;) i s defined as

AEi A0 +co (A0 +a cole

AE-ADJ, =

where Au and Cu are the number o f adults and children in the “pivotal” household, respectively, and Aiand Ci are the number o f adults and children in the i” household.

The modal or pivotal household in Turkey i s a 4-member household with 2 adults and 2 children (Au = 2 and C, = 2). AEi here i s from the general formula above.

OECD Equivalence Scale

AE-OECD = 1+ [number of children under age 141 x 0.5 + ([number o f adults] - 1) x 0.75.

F A 0 Equivalence Scale

AE FA0 = (n-ch5 x 0.64 + nch5-11 + nm12-17 + nfl2-17 x 0.84 + nm18-39 + nfl8-39 x 0.84 + nmZ0- x 0.88 + nf40- x 0.76) x 0.75

where n-ch5 i s the number o f children under age 5, nch5-11 i s the number o f children aged 5 to 1 1, nm12-17, nf12-17 are number of male and female children, respectively, aged 12 to 17, and nm40 - and nmf40- are the number o f males and females aged 40 and above, respectively.

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Table A.I. 1 describes the relation between the adult equivalent sizes and the real size o f the household, for a = 0.9 and 8 = 0.6:

Table A.I.1. Household Size b y the Set-Type of Settlement

Household size

Adult equiv. size general formula

AE adjusted by modal HH (2 ad + 2 ch)

Adult equiv. size OECD

Adult equiv. size FA0

Source. DIE, Turkey 2002 HBS.

rype of

Rural

4.30

2.29

4.12

3.21

2.63

ettlement

Urban

4.07

2.23

4.01

3.02

2.55

rurkey

4.16

2.26

4.05

3.09

2.58

The variation o f adult equivalent size o f households depending o n equivalence scale type and parameters a and 8 are presented in Appendix 6.

Since there i s n o guidance from the literature on val id empirical determination, once the sensitivity of findings to the scale has been demonstrated (Appendix 6), a normative choice must be made as to which to use. This analysis has chosen the adjusted adult equivalence scale based o n the modal household (Deaton and Zaidi) approach for its basic approach, and compared it to the main poverty l ine (explained below) using a = 0.9 and 8 = 0.6.

Using Day-Based Measures

T o make welfare comparisons across households surveyed during months with different numbers o f days, some way o f adjusting the welfare measures i s needed. The daily measures were calculated by dividing the monthly measures into the number o f days in each survey month. The daily welfare measures are used for the poverty and inequality analysis. Average monthly measures are constructed by multiplying the daily welfare o f the household by 30.41’7 (the average number o f days in the month).

Structure of Income and Consumption

Income

The average household disposable income according to the survey data was around TL672 mi l l ion per month for 2002, o f which TL639 m i l l i on i s the average cash income and the other TL33 mi l l ion i s the average household income in kind.

Structure of Cash Income

The main source of income for Turkish urban households i s wages and salaries (43.4 percent), and for rural households it i s the income f rom agricultural activities (32.5 percent).

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Table A.1.2 describes the structure o f cash income.

Table A.I.2. The Structure of Cash Income

Total net income in cash from al l previous jobs in the last 12 months

Rent from real estate income in cash in the survey month

Interest income in cash from movable property in the survey month

survey month Transfer income in cash in the

133,371,432 76,957,193 168,881,759 0.2086 0.1416

26,197,746 10,929,818 35,808,248 0.0410 0.0201

31,794,266 15,809,179 41,856,189 0.0497 0.0291

116,345,155 87,212,289 134,683,036 0.1820 0.1605

ttlement Urban Share

1

0.4340

0.2206

0.0144

0.0198

0.2414

0.0512

0.0598

0.1925

The Structure of Consumption

The main i tem o f consumption o f Turk ish households i s the category o f housing and water consumption (28.7 percent). Th is estimate includes the value o f real housing rents for households rent ing the apartment or house, and the value o f imputed rents for house and apartment owners. T h e second important i t em i s food consumption (25.45 percent).

For urban and rural households there i s a slight difference in the importance o f consumption items. The ma in i t e m for rural households i s food consumption (26.96 percent), and the second i t e m i s housing (22.73 percent), wh i le for the urban households the m a i n i t em o f consumption i s housing (3 1.53 percent), and the second i t em i s food consumption (24.73 percent).

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Table A.I.3 describes the structure o f consumption.

Food received as income in kind from activities and real estate Non-food goods and services received as income in kind from activities and rea l estate Food received as a present Non-food goods and services received as a present

2,954,25 1 2,272,086 3,383,645 0.0053 0.0049 0.0055

23,219,048 13,191,239 29,531,122 0.0418 0.0284 0.0481 5,384,374 5,513,449 5,303,127 0.0097 0.01 19 0.0086

6,797,208 5,596,940 7,552,724 0.0122 0.0121 0.0123

Inequality Measures

L o w income and consumption, and inequality in their distribution, are the key determinants o f the well- being of the population. One o f the common indicators o f inequality i s the decile 90/10. In this analysis, the decile 90/10 i s the adjusted (by the modal household) per adult equivalent deflated consumption (PEC) o f the 90th percentile divided by the PEC of the 10th percentile, that is, the PEC o f the poorest person in the richest decile over the PEC o f the richest person in the f i rs t or poorest decile. This indicator i s easy to interpret, but i t does not reflect the situation in the middle o f the distribution. The decile ratio 90/10 i s estimated as 4.38 for PEC.

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The PEC and adjusted per equivalent income (PEI) by deciles are presented in Table A.I.4.

Table A.I.4. Average Monthly Consumption Per Capita and Per Adult Equivalent, by Deciles TL Per Month

Adult Equivalent Adjusted with

Modal HH

55,348,090

100,4363 17 96,184,245 6 115.135.441 112.996.782

. .

Turkey 132,137,395 I 133,701,603 Source: DIE, Turkey 2002 HBS.

Another common inequality measure i s the Gini coefficient, which i s sensitive to a l l the parts o f distribution. The Gini coefficient i s bounded between 0 and 1; i t i s 0 in the case o f absolute equality, when the per equivalent consumption o f each person i s the same, and it i s 1 in the case o f absolute inequality, when one person consumes everything and others consume nothing.

The Gini coefficient i s g v e n by:

where there are n individuals indexed by i, their equivalent consumption i s given by ci, mean equivalent consumption i s denoted by p, and where ri i s household’s i rank in the equivalent consumption ranlung (that is, for the household with lowest equivalent consumption, r; equals 1, whi le for the household with the highest equivalent consumption, ri equals n).

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Figure A.I. 1 describes the inequality based on PEC.

Figure A.I.l. Cumulative Distribution of PEC

~' 0.9 0.8 0.7 0.6 0.5 0.4

1 0.3 0.2

0 i 0.1 ,

The Gini concentration coefficient i s calculated on the basis o f individual information o f the H B S database, which i s more accurate than if we use consumption or income by deciles. The Gini coefficient i s not an additive or decomposable measure, meaning that i t may not be broken down by population groups or income sources or in any other dimension.

The Thei l index o f inequality i s given by:

The Thei l index i s most sensitive to inequality in the top o f the distribution, while the mean l o g deviation measure, also called the Theil-T index, i s most sensitive to inequality in the bottom range o f the distribution. The Theil-T formula is:

Neither the Theil index nor the mean log deviation measure i s easy to interpret, except in reference to other countries or the same country at different points in time. B o t h measures are zero for perfect equality. For complete inequality (one person consumes everything), Theil-T goes to infinity, and Theil-L reaches nln(n).

The other inequality decomposable measures presented along with the Gini coefficient in Table A.I.5 are the Thei l T index and Thei l L index.

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Table A.1.5. Inequality Measures

Both indexes indicate that inequality i s higher in urban areas than in rural areas. Inequality based o n income i s greater than inequality based on consumption.

Poverty

Poverty Lines and Poverty Rates

Where the poverty l ine i s drawn depends at least o n how the fol lowing questions are answered: what indicator i s used to measure the well-being o f a household, which poverty l ine i s used, and which minimal consumer basket i s used in case the “food poverty line” i s chosen. I t should be emphasized that there i s n o perfect indicator identifying the living standard. Wor ld Bank practice i s to set at least two poverty lines, one for extreme or food poverty, the other for overall poverty. However, the Wor ld Bank also uses several absolute poverty lines for international comparisons, and relative poverty i s used in the OECD countries for comparison. This appendix lays out several possible lines, and decides o n a main l ine (the complete poverty line) that can be subdivided into overall poverty and food or extreme poverty.

Absolute Poverty Lines

The fol lowing absolute poverty lines were used for the analysis: US$l.OO, US$2.15, US$4.30 by purchasing power parity (PPP) for international comparisons. PPP exchange rates reflect the purchasing power o f national currencies, and differ (sometimes substantially) f rom current market exchange rates. According to DIE, US$l.OO PPP in Turkey i s estimated as TL663,575 for 2002. This i s DIE’S current estimate o f PPP. In Wor ld Bank publications, such as the World Development Indicators, PPPs are often estimated by taking a base year and extending i t by the CPI. In the comparisons chapter, two different kinds o f PPPs are used, one the extended-by-CPI version, and the other the current DIE PPPs.

Using the current DIE PPP, the absolute poverty lines used for the analysis here are TL663,575 (US$l.OO PPP), TL1,426,686 ($2.15 PPP), and TL2,853,373 ($4.30 PPP) per day per adult.

Relative Poverty Line

The relative poverty l ine used for the analysis i s drawn as 60 percent o f median consumption per capita. I t i s estimated as TL2,377,139 per day per adult. The relative approach i s a common practice in OECD countries, where the notion o f abil ity to share in increased general prosperity, rather than absolute survival, i s probably more relevant.

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Food Poverty Line

The food poverty line was developed using the actual quantities for the most popular 80 products consumed in the third and forth deciles o f the population, priced out by using the country average survey prices for 2002. The calorie intake information from the 2002 HBS survey was calculated using the United States Department o f Agriculture (USDA) nutritional database. The composition o f the minimum food basket was calculated on this base to reach 2,100 Kilocalories per day (Kcal) per average person per day (a nutritional minimum accepted internationally according to FA0 and World Health Organization [WHO] recommendations). By using the price information from the 2002 HBS survey, i t i s estimated that the amount necessary for attaining the minimum food consumption i s TL1,082,359 per person per day in an average Turkish family.

Table A.I.6 describes the structure o f a minimum food basket based on the consumption patterns o f the reference population, which are population deciles 3 and 4 by food consumption.

Table A.I.6. The Structure of a Minimum Food Basket Estimated Based on Survey Data

Detailed information about the structure and cost o f a minimum food basket i s found in Appendix 5.

Complete Poverty Line

Individuals have non-food needs in addition to food needs. Taking into account the need for non-food consumption requires adding an allowance for non-food goods and services to the food poverty line. The lower-bound method o f Ravallion (1994) i s used here to determine the value o f the general poverty line.

To determine the allowance for non-food consumption, using the survey data itself, f irst those individuals whose total consumption i s just above the value o f the food poverty l ine are selected. This part o f the sample will now constitute the reference group for the derivation o f the general poverty line. The share of total consumption that goes to non-food consumption i s calculated for this reference group. This share i s the “allowance” for non-food consumption that i s added to the value o f the food poverty line to get the complete poverty line.

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The share o f non-food consumption among those whose total consumption i s just above the value o f the food poverty line i s 57 percent, and food consumption represents 43 percent. The value o f the complete poverty line i s thus:

Household Size

Complete Poverty Line (CPL) = Value o f Food Consumption + Value o f Non-Food Consumption

Average Poverty Line for Household Deflated

where:

1

Food Consumption = Value o f Food Poverty Line = TL1.08Mlm = 43% o f CPL Non-food Consumption = 57% o f CPL

137.055.990

CPL = TL1.08Mln divided by 0.43 = TL2.5Mln = TL1.08 Mln + TL1.42 Mln.

2

The CPL i s estimated as TL2,510,930 per day per person, which includes a 43.1 percent food component (TL1,082,359) and 56.9 percent non-food component (TL1,428,571). This structure i s based on the consumption pattems o f population whose adjusted PEC i s just above the food poverty line. These households are in the f irst decile o f PEC.

207,561,617

This method o f deriving the complete poverty line i s the simplest way to assess the value o f the minimum consistent with the actual consumption pattern o f the population.

4

We have chosen the simplest method described above, because it i s the most transparent, most easily replicable, and most intuitive. It could be argued that other l ines would be more accurate. However, if a certain way to set the l ine i s not commonly understood, i t s use will not help the national poverty diagnostics. Given the fact that any poverty l ine i s a matter o f convention and includes in itself a technical judgment, the team considered the CPL thus derived as the most accurate for the use with the 2002 HBS data set, and for the analysis o f poverty in Turkey. The value o f the CPL i s presented in Table A. 1.7.

309,55 1,477

8 466,737,285 9 500.4 14.569

I 7 1 431,521,387 I

I 10 I 532,742,054 I

126

Poverty Statistics Three different poverty measures are used in this analysis, a l l o f which are members o f the class o f additive and decomposable measures proposed by Foster, Greer, and Thorbecke (1984). The first measure i s the Headcount Index of Poverty, given by the proportion o f the population for which total per capita household consumption (income) y i s less than the poverty l ine z. I t i s the most frequently used poverty measure. The main advantage o f this statistic i s i t s simplicity. If q i s the number o f poor people in the population o f size n, then the headcount i s given by:

PO P I P2

4 PO=- n

Poverty Poverty Line=$2.15 Line=%4.3 Re'ative Poverty L i n e s 1

1.082.359 2.510.930 Line 1.980.949 ppp=663575 TLlday PPP=1426686 PPP=2853373 TLlday TL/day TLlday TLlday TLlday 0.0135 0.2696 0.1474 0.0021 0.041 1 0.3414 0.0026 0.0688 0.03 13 0.0004 0.0083 0.0973 0.0008 0.0253 0.0104 0.0001 0.0027 0.0384

Food Complete Poverty Line Poverty Line Poverty

However, the headcount measure i s totally insensitive to differences in the depth o f poverty. A way to look at the poverty deficit o f the poor relative to the poverty line i s to use the Poverty Gap Index. Let Q be the subgroup o f poor; the poverty gap i s then given by:

The poverty gap also allows an interpretation in terms o f the potential fiscal cost for eliminating poverty by targeting transfers to the poor. Summing a l l the poverty gaps in the sample population and taking the average provides an estimate o f what would be the minimum cost o f eliminating poverty in the society, assuming perfect targeting.

One shortfall o f the poverty gap measure i s that it may not adequately capture differences in the severity o f poverty. A way to tackle this problem i s to include the Severity of Poverty Index in the poverty analysis. This measure gives more weight t o the consumption (income) gap of those households located further below the poverty line, and i s defined as:

The severity index has the main advantage o f comparing policies that a i m to reach the poorest, but it i s more diff icult to interpret and i s less intuit ive than the two previous poverty measures.

Table A.I.8 represents the poverty headcount, gap, and the severity index based on adjusted and deflated PEC and complete various poverty lines. Note that in this table, poverty measures are not in percent as presented in the main text, but are in levels. T o obtain percentages, multiply by 100.

Table A.I.8. Poverty Headcount, Gap, and Severity Index, Based on Adjusted and Deflated PEC and Complete Various Poverty Lines

127

Other poverty figures based o n other welfare indicators, CPI, parameter o f economies o f scale, and adult equivalence are presented in Appendix 3.

CPI DIE CPI DIE

Imputed Reported Rent by Rent by HH

Sensitivity of Poverty Statistics

CPI Survey CPI Survey

Imputed Reported Rent by Rent by HH

The poverty indexes are sensitive to the methodology o f constructing the welfare aggregate, choosing the reference population for defining the food basket, choosing adult equivalence, and economies o f size parameters. Table A.1.9 represents the poverty headcount index, poverty gap, severity, and shortfall index depending o n several key parameters o f how they were calculated:

PO

Regression I Regression Food Poverty

0.0438 I 0.0462 0.0379 0.0388 P I P2 Shorkfall

~~

0.0083 0.0090 0.0067 0.0073 0.0026 0.0028 0.0021 0.0022 0.1894 0.1943 0.1775 0.1877

PO P I P2

More detailed information about the results o f the sensitivity analysis can be found in Appendix 3.

Complete Poverty 0.2896 0.281 0 0.2696 0.2618 0.0764 0.0749 0.0688 0.0691 0.0288 0.0287 0.0253 0.0259

Comparison with Previous World Bank Estimates

There are significant differences between the main poverty l ine used in this report and the poverty l ine and consumption aggregate o f the Wor ld Bank’s previous Poverty Assessment (PA), which used the 1994 data (World Bank 2000), and the two figures are not directly comparable. In the previous PA, the food basket was developed by Turkish academic institutions, and it i s much richer in terms o f quantity and quality o f food. The caloric value o f the food basket used for the previous PA i s more than 3,000 Kcal/day. T h i s poverty l ine i s much higher than the main one used herein.

The data collected in both 1987 and 1994 seem to adequately address most o f the problems in measuring well-being. Unfortunately, it was impossible to fo l low the new methodology to recalculate basic results for 1994, because the 1994 data are not in a format that could be used without going back to the l ine i tem codes, which would be prohibit ively costly in terms o f staff time. Thus the decision was to apply to the 2002 data the o ld methodology to obtain roughly comparable results. The current consumption indicator for measuring living standards and poverty based on Turkish household data includes:

All monetary non-business and non-investment expenditures the (2002 version would exclude a l l durables; the 1994 version would exclude only expenditures o n selected items) Gifts, earnings, and transfers in kind Consumption f rom stocks Consumption f rom own production

128

0 Imputed rents from owner-occupied housing (imputed by regression in 2002 methodology and self-reported in 1994).

79.1% 72.6%

In addition, the methodology developed for the analysis o f 1994 data relied on spatial and time indexes o f prices from the official CPI statistics, while the new methodology i s based on survey unit values.

7.8% 3.9% 9.1% 17.5% 3.6% 6.3%

To obtain comparable figures, the 1994 methodology was applied to the 2002 HBS, including the use o f the CPI instead o f the survey price index. Data are broadly comparable, but some important differences are noticeable in the detailed structure o f both aggregates.

71.0

Table A.I.10 shows the consumption o f food per household. While overall the change o f total per- household consumption i s within the plausible range, some important changes in the structure reflect the comparability problem. In the 1994 consumption aggregate, both in-kind consumption o f own food and consumption from stock were included. The DIE was concerned that this might lead to double counting. In the new version o f the questionnaire, much more detailed information on consumption from stocks i s included, and only own production i s included in the food consumption.

31.8 I 96.5 I 99.6

Table A.I.lO. Food Consumption and Expenditures, 1994 and 2002

55.7 4.8 62.0 20.5

~ Rura l

59.9 38.6 73.1 58.4

Urban

Urban

Total Food per Household, TL/Month

203.759.737 I ,

200,831,846 201.962.890

3.344.540 , ,

3,988,774 3,676,828 , ,

4-2002. Times 60.9 50.3 54.9

Consumed I n

Outside Earnings or Gifts (aid) Production

73.1% I 4.9% I 6.1% 87.6% 1 0.7% I 4.6% I 7.0% 82.0% I 6.5% I 4.8% I 6.7%

62.8% I 30.4% I 3.1% I 3.8%

This factor, with some economic changes, explains the very small change in the consumption o f own food for urban households. On the other hand, the consumption o f meals outside o f the home has clearly not kept pace with the overall consumption o f food, especially in urban areas, suggesting that the current questionnaire forms for collecting these types o f expenditures may need revisions.

Creating the “previous” methodology consumption aggregate included these adjustments: 0

0

0

0

0

0

Household consumption includes the purchase o f all durable goods, excluding cars. The FA0 adult equivalence scale was used. The official CPI was used for deflation. The value o f the minimum food basket o f the P A was used as a food poverty line. The quantities from the Hacateppe basket were priced out by using the 2002 survey prices. The same non-food share i s added to the poverty line for different regions and settlement types.38

38 No te that the PA generated these constants by regression. W e s imply use them “as is.”

129

The 2002 poverty l ine comparable with the P A i s TL2,361,383 = US$3.60 PPP at 2002 prices.

2002 HBS, using 1994 food basket and previous algorithm for poverty line and welfare measure

PA

Poverty rates according to the poverty l ine based on the minimal food basket used for P A 1994 and using comparable methodology are given in Table A.I. 1 1.

Complete p l P2 Poverty Complete Complete

2002 0.352 0.108 0.045

1994 0.363 0.109 0.046

Table A.I.ll. Comparable Poverty Measures, 1994 and 2002

Thus, there was a very slight decrease in poverty between 1994 and 2002.

Comparison o f the Food Basket Used for the 1994 Poverty Assessment and the Food Basket Developed Based on Survey Data

There are significant differences among the poverty line, the consumption aggregate, and the methodology used in this analysis o f the 2002 HBS compared to what was done for the previous P A using the 1994 data. Thus, the poverty figures presented above are not comparable with poverty figures o f the 1994 PA. In the previous PA, the food basket was developed by a Turkish academic institution, and i t i s much richer in terms o f quantity and quality o f food. The caloric value o f the food basket used for the P A (1994 data) i s around 3,000 Kcal/day. I t i s important to note that the new survey-based basket gives a much more realistic structure o f consumption o f the poor population than the one used for the 1994 data analysis. Table A.I. 12 l ists the approximate comparison.

Table A.I.12. Food Basket for Equivalent Adult: 2002 Survey-Based and Hacettepe University (kilograms per day per adult)

. . . = Not available. n.e.c. = Not elsewhere classified.

The food poverty l ine based on the food basket developed by Hacettepe University i s TL2,361,383 per adult per day = US$3.60 PPP at 2002 prices.

130

Talung into account the parameter o f the approximate difference between the food consumption o f adults and children (0.9), the food line per chi ld in the modal family i s TL2,125,244 per day, and the food line per average person in the modal family i s TL2,243,314 per day, which i s significantly more than the estimated poverty l ine based on the consumption o f the third and fourth deciles o f population (TL1,082,359 per person per day).

If we price out the minimum food basket developed by Hacettepe University, add the same 57 percent non-food share for modal households, and use the same adjusted equivalence scale, then the complete poverty l ine becomes TL2,243,314 divided by 0.43, or equal to TL5,217,009 per person per day in the modal family (or US$7.86 PPP). The poverty headcount index based o n this poverty l ine i s 75 percent, which i s far too high to be usable for either public pol icy applications or research.

131

Appendix 1: Income and Consumption by Poverty Status and UrbadRural Dimension

Turkey Urban Rural

1 Household's Average Monthly Consumption (TL)

I

Non-Poor Poor 1 Households 1 Households ~

I

Consumption 02,387,828

41,54 1,355 i Food and nonalcoholic beverages I

Alcohol and tobacco

510,357,187 660,317,142 700,347,775 264,094,536 1 I

125,083,823 15 1,900,660 157,345,897 86,962,205

r Clothing and footwear

Housing, water supply I

36,289,947

59,589,070 I , Furniture HH appliances and home care

I Health

services I

30,474,680 39,950,407 43,977,902 9,740,489

105,441,687 193,672,510 185,916,570 68,670,110 I

7

Transportation

Communication 1

46,917,368

27,362,109

Entertainment and culture

33,023,943 55,662,679 58,045,979 8,486,002

20,820,121 31,480,008 32,599,264 9,276,204 I

Education

14,862,268

8,387,213 I Restaurants and hotels

12,101,713 16,599,919 18,169,140 3,442,372

4,497,613 10,835,548 10,675,340 485,429 I

Various goods and services

~ Own produced food for s e l f consumption I

15,037,810

25,330,134

1

Own produced non-food for self-

Food received as income in kind from

Non-food goods and services received as i

consumption

activities and real estate

I

r

income in kind from activities and real estate

13,358,012 16,095,170 18,077,677 4,539,983,

22,389,654 27,18 1,039 30,953,323 5,911,102 ~

I

Food received as a present

Non-food goods and services received as I

a present

14,465,225

3,646,997

Source: DIE. Turkev 2002 HBS.

35,028,585 1,521,478 13,837,979 16,631,345

9,041,038 251,681 3,466,240 4,271,221 1

I Type o f Settlement I

2,954,25 1

23,219,048

5,384,374

Poverty Status

2,272,086 3,383,645 3,328,750 1,660,964 I

13,191,239 2933 1,122 28,219,806 5,949,515 I

~

5,513,449 5,303,127 5,418,279 5,267,284 I

6,797,208 5,596,940 7,552,724 7,798,547 3,339,198

24.158.598 1 23.370.600 I 24.654.608 I 27,146,480 I 13,840,292:

~

43,2 16,912 40,37 1,957 45,007,688 1 52,530,573 I 11,053,266' I I i I I I I I

14.127.7121 13.955.395 I 14.236.1781 16.921.274 I 4.480.470 !

132

Household's Average Monthly Food Consumption (TL)

Food and nonalcoholic beverages

Bread and cereals

Meat and meat production

Fish

Milk, cheese, and eggs

Fats and oils

Fruits

Vegetables

Sugar, jam, honey, chocolate, and confectionery

Nonalcoholic beverages

Source: DIE, Turkey 2002 HBS.

Turkey

141 3 4 1,355

34,248,017

19,760,842

1,893,908

17,324,07 1

10,313,034

13,248,611

21,112,786

12,376,600

8,388,184

Poverty Status

Yon-Poor HH

157,345,897

36,866,463

23,512,042

2,198,002

19,687,699

1 1,238,373

14,937,249

22,659,346

13,5 10,851

9,5 1 1,660

Poor HH

<6,962,205

!5,205,5 18

6,806,509

843,758

9,161,555

7,117,483

7,417,097

15,771,920

8,459,596

4,508,388

Household's Average Monthly Alcohol and Tobacco Consumption (TL)

Alcohol and tobacco

Alcohol

Tobacco

Source: DIE, Turkey 2002 HBS.

Turkey

24,158,598

1,962,920

22,195,678

Type of Settlement ' Poverty Status

Rural

23,370,600

2,029,541

2 1,34 1,060

Urban

24,654,608

1,920,985

22,733,623

Non-Poor HH Poor HH

27,146,480 13,840,292

2,362,809 58 1,949

24,783,671 13,258,343

Household's Average Monthly Clothing and footwear Consumption (TL)

Type of Settlement Poverty Status

Rural Urban Non-Poor HH Poor HH Turkey

Clothing and footwear

Fabrics

Clothing (man, woman, children)

Accessories and other clothing

Dry cleaning, mending, and hiring

Footwear

Repair and hiring o f footwear

Source. DIE, Turkey 2002 HBS.

36,289,947

1,066,185

30,474,680 39,950,407

1,164,060 1,004,577

24,619,709 20,230,937 27,382,252

1,426,808 1,253,045 1,536,184

416,676 286,582 498,565

8,636,495 7,460,496 9,376,736

124,073 79,560 152,092

43,977,902 9,740,489

1,278,976 331,337

30,215,310 5,295,952

1,64 1,346 685,926

526,456 37,565

10,17 1,666 3,334,960

144,148 54,747

133

Household's Average Monthly Housing Consumption (TL)

Housing, water supply

Housing rents (real for owners and imputed for non-owners

Maintenance and repair

Various services related to water supply and

Electricity, gas, and other fuel

Source: DIE, Turkey 2002 HBS.

dwelling

Turkey

159,589,070

77,976,501

8,355,128

12,432,638

49,925,03 1

Type of Settlement

Rural

105,44 1,687

44,322,664

8,859,876

5,827,295

41,256,505

Urban

193,672,5 10

99,160,139

8,037,411

16,590,4 17

55,323 1,495

Poverty Status

Non-poor HH

185,9 16,570

87,538,065

10,603,146

14,8 84,063

58,810,050

Poor HH

68,670,110

44,956,754

591,859

3,966,929

19,241,652

Household's Average Monthly Expenditures on Furniture HH Appliances and Home Care Services (TL)

Furniture HH appliances and home care

Furniture, household textile, carpet and other

Household textile

Household appliances

Glassware

House and garden appliances

Nondurable household goods and services

Source. DIE, Turkey 2002 HBS.

services

floor coverings

Turkey

$3,216,912

15,451,131

3,568,869

10,376,276

2,692,338

972,847

10,155,452

Type of Settlement

Rural Urban

40,371,957 45,007,688

16,994,088 14,479,905

3,792,127

9,091,674

1,853,838

1,2 19,101

7,42 1,129

3,42 8,3 3 8

1 1,184,877

3,220,138

817,840

11,876,590

Household's Average Monthly Expenditures on Health (TL

Health

Medical products, appliances, and materials

Treatment without keeping in hospital

Treatment in hospital

Source DIE, Turkey 2002 HBS.

Turkey

.4,127,712

6,155,298

6,366,685

1,605,728

Type of Settlement

Rural Urban

13,955,395 14,236,178

6,276,510 6,079,001

6,560,875

1,118,010

6,244,45 1

1,912,726

Poverty Status

Poor HH Non-Poor HH

52,530,573 11,053,266

19,270,358 2,261,871

4,536,687

12,358,762

3,240,661

1,108,330

12,015,775

226,622

3,529,990

798,769

5 04,97 3

3,731,041

Poverty Status

Non-Poor HH Poor HH

16,92 1,274 4,480,470

7,036,015 3,113,846

7,832,358 1,305,156

2,052,902 61,468

134

Household's Average Month ly Expenditures on Transportat ion (TL)

Turkey

46,917,368

6,286,030

22,862,932

17,768,406

Type o f Settlement Poverty Status

Non-Poor Poor Rura l U rban Households Households

33,023,943

1,436,997

5 5,662,679 58,045,979

9,338,287 8,060,823

8,486,002

156,990

Transportation

Vehicle purchase

Operating o f the personal vehicles

Transportation services

Source: DIE, Turkey 2002 HBS.

19,292,156 25,110.58 1 28,851,25 1 2,182,969

12,294,789 21,213,811 21,133,906 6,146,043

Household's Average Month ly Expenditures on Communication (TL)

Poverty Status Type of Settlement Turkey

27,362,109

40,906

3,380,155

23,94 1,048

Poor Households

9,276,204

5,468

573,328

8,697,408

Rura l

20,820,121

19,079

3,773,542

17,027,500

Non-Poor Households

32,599,264

51,168

4,192,931

28,355,165

Urban

3 1,480,008

54,644

3,132,535

28,292,828

Communication

Postal services

Telephone and telefax

Telephone and telefax services

Source: DIE, Turkey 2002 HBS.

equipments

Household's Average Month ly Expenditu es o n Entertainment and Culture(TL)

Turkey

14,862,268

5,858,250

374,641

898,017

2,787,295

Type of Settlement Poverty Status

Non-Poor Urban Households

Poor R u r a l

12,101,713

7,012,750

719,760

5 10,499

1,23 1,942

2,617,93 1

8,831

Households

3,442,372 Entertainment and culture

Visual, auditory, and photography

Other main durable recreational and

equipment

cultural goods

Other recreational equipment, goods, and services for gardening and pets

Recreational and sport services

16,599,919 18,169,140

5,131,541 6,986,606

157,403 482,242

1,14 1,943 1,118,226

3,766,323 3,492,486

4,67 1,764 4,715,980

1,730,945 1,373,599

1,961,602

3,05 1

137,549

35 1,999

Newspaper, book, and stationery 3,878,372

Tours 1,065,695

985,787

2,384

Source: DIE, Turkey 2002 HBS.

135

Household's Average Monthly Expenditures on Education (TL)

Education

Pre-primary and primary education

Secondary education

Pre-university education

University education

Education not definable by level

Source: DIE, Turkey 2002 HBS.

Turkey

8,387,2 13

1,478,850

1,057,236

3,609,717

1,822,2 12

419,198

Type o f Settlement

Rural

4,497,613

527,594

1,260,763

1,748,586

883,182

77,488

Urban

10,835,548

2,077,624

929,125

4,78 1,2 18

2,4 13,29 1

634,289

Poverty Status

Yon-Poor Households

10,675,340

1,867,793

1,323,594

4,607,833

2,349,872

526,248

Poor Households

485,429

135,678

137,399

162,840

0

49,512

Household's Average Monthly Expenditures on Education (TL)

Restaurants and hotels

Meal services

Accomodation services

Source: DIE, Turkey 2002 HBS

Type of Settlement Turkev

15,037,810

13,459,082

1,578,728

Rural

13,358,012

12,491,193

866,819

Urban

16,095,170

14,068,326

2,026,844

Poverty Status

Yon-Poor Households Poor Households

18,077,677 4,539,983

16,059,038 4,480,438

2,018,640 59,545

Household's Average Monthly Expenditures on Education (TL)

Various goods and services

Personal care

Other personal care Materials

Social services

Insurance

Financial services

Other services

Source: DIE, Turkey 2002 HBS.

Turkey

25,330,134

10,020,723

5,373,555

30,364

1,467,226

207,427

8,230,839

Type of Settlement

Rural

!2,389,654

6,681,370

7,150,584

0

586,990

235,172

7,735,537

Urban

!7,18 1,039

12,122,701

4,254,992

49,477

2,02 1,297

189,962

8,542,610

Poverty Status

Yon-Poor Households

30,953,323

11,979,547

6,608,523

39,156

1,874,328

266,150

10,185,620

'oor Households

5,911,102

3,256,151

1,108,737

0

6 1,349

4,635

1,480,230

136

Household's Average Monthly Income (TL)

Total monthly disposable income

Total monthly income in cash

Total monthly income in kind

Source: DIE, Turkey 2002 HBS.

Type of Settlement

Rural Urban Turkey

672,103,224 564,545,784 739,805,987

639,211,405 543,466,796 699,478,501

32,891,819 21,078,988 40,327,486

Household's Average Monthly CASH Income (TL)

Type o f Settlement

Total monthly income in cash

Total net cash income as wage or salary in the survey month

N e t disposable income in cash in the survey month

Total net agricultural income in cash in the survey month

Total net income in cash from additional job in the survey month

Total net income in cash from al l previous jobs in the last 12 months

Rent from real estate income in cash in the survey month

Interest income in cash from movable property in the survey month

Transfer income in cash in the survey month

Source. DIE, Turkey 2002 HBS

Turkey

639,211,405

24 1,134,556

125,712,674

74,346,597

19,295,668

133,371,432

26,197,746

3 1,794,266

116,345,155

Rural

j43,466,796

14 1,984,036

80,282,906

176,424,673

27,982,891

76,957,193

10,929,818

15,809,179

87,212,289

Urban

j99,478,50 1

303,545,527

154,308,750

10,092,856

13,827,436

168,88 1,759

35,808,248

4 1,856,189

134,683,036

Poverty Status

Non-Poor Households

738,542,973

281,879,866

148,329,645

74,172,091

21,735,790

127,474,292

32,685,823

39,973,071

136,385,222

Poor Households

296,181,381

100,425,364

47,607,591

74,949,230

10,868,989

153,736,516

3,79 1,927

3,549,714

47,139,116

137

Household's Average Monthly Income I n Kind

Total monthly income in kind

Total income in kind as wage or salary in

Total income in kind as entrepreneurship

Total net agricultural income in kind in

Total income in kind from additional job

Total income in kind from al l previous

Rent from real estate income in kind in

Imputed rent for the survey month

Transfer income in kind in the survey

the survey month

income in the survey month

the survey month

in the survey month

jobs in the last 12 months

the survey month

month

Source: DIE, Turkey 2002 HBS.

Turkey

32,891,819

22,482,203

3,500,954

7,585

182,557

4,823,847

2,053

0

6,483,009

Type of Settlement

Rural

:1,078,988

2,43 1,164

2,78 1,567

14,474

236,119

2,042,993

0

0

5,298,640

Urban

,0,327,486

18,808,898

3,953,778

3,249

148,842

6,574,275

3,345

0

7,2283 19

L) Poverty Status

Non-Poor Households

38,174,736

27,322,675

4,013,223

9,782

202,875

4,856,705

2,647

0

6,413,460

Poor Households

14,647,880

5,766,196

1,73 1,892

0

112,392

4,710,377

0

0

6,723,191

Household's Average Annual Income (TL)

Total annual disposable

Total annual income in cash

Total annual income in kind

Type of Settlement

Source. DIE, Turkey 2002 HBS

Turkey Rural

7,65,260,790 6,056,834,352

6,964,504,409 5,879,567,064

300,756,381 177,267,287

Urban

3,025,913,OS 1

7,647,425,6 17

378,487,433

Poverty Status

Non-Poor Households

8,406,3 163 17

8,06 1,387,046

344,929,77 1

Poor Households

3,324,756,431

3,176,547,7 17

148,208,714

138

Household's Avera

Total annual income in cash

Total net cash income as wage or

Total bonus income in the last 12

salary in the last 12 months

months

Total premium, allowance income for bayram, etc., in the last 12 months

Total expertise, counseling income

Total per diem (travel allowance) income in the last 12 months

Total net disposable

in the last 12 months

entrepreneurship income in cash in the last 12 months

Total net agricultural income in cash in the last 12 months

Total net income in cash from additional j o b in the last 12 months

Total net income in cash from al l previous jobs in the last 12 months

Rent from real estate income in cash in the last 12 months

the last 12 months

Interest income from foreign currency bank accounts in the last 12 months

Profit income from bank account in

Interest income from bond,

Interest income from capital association in the last 12 months

Interest income from private finance council in the last 12 months

debenture in the last 12 months

Pension from government in the last

Tax (returned) from government in

12 months

the last 12 months

Turkey

5,964,504,409

!,3 17,576,913

l13,693,73C

35,172,034

2,337,690

0

. ,391,840,185

892,143,203

182,262,486

133,37 1,432

296,235,392

232,4 16,447

15,921,198

62,046,915

44,757,623

10,975,697

826,171,920

57,553,657

Annual Cash Income (TL)

Type of Settlement

Rural Urban

j,879,567,064 7,647,425,6 17

1,3 12,237,637 2,950,394,574

62,025,938

12,356,576

213,510

0

842,269,3 85

!,117,055,050

267,491,791

76,957,193

12 1,396,133

146,2 16,374

49,533,379

3,674,769

0

1,737,771,271

12 1,114,091

128,614,3 19

168,881,759

406,289,156

72,899,704 332,825,348

Poverty Status

Non-Poor HH Poor HH

3,061,387,046 3,176,547,7 17

!,719,991,977 927,883,264

143,762,894

44,111,001

3,013,178

0

1,656,452,040

890,05 1,084

205,369,279

127,474,292

370,04 1,275

295,033,799

22,954,920 11,493,774 19,978,704

31,452,401

1,504,454

582,618

559,878,543

32,206,320

8 1,304,841

7 1,983,626

76,204,O 16

57,702,776

17,517,691 14,151,698

993,792,102

73,508,7 10

982,267,466

69,285,744

9,853,367

4.302.351

4,969

0

478,033,898

899,368,096

102,465,863

153,736,516

41,355,353

16,174,699

1,909,075

13,157,012

53,043

7,744

287,114,095

17,038,255

139

Household's Averar

Scholarship from government in the

Old-age income from government in the last 12 months

Unemployment pension from government in the last 12 months

Orphan and widower pension from government in the last 12 months

last 12 months

Disability (war veteran) pension from government in the last 12 months

Pension from abroad in the last 12 months

Foreign currency from abroad in the

Scholarship, alimony, etc., from abroad in the last 12 months

Alimony income from other private

last 12 months

persons or institutions in the last 12 months

Scholarship, alimony, etc., from other private persons or institutions in the last 12 months

Source: DIE, Turkey 2002 HBS.

Turkey

3,206,961

43,412,524

1,425,121

93,558,512

10,035,59 1

35,115,146

8,254,063

21,380,827

4,970,810

128,668,333

Annual Cash Income (TL)

Type of Settlement Poverty Status

Non-Poor HH Rural Urban

2,708,054 3,521,002 3,721,242

96,626,467

2,805,205

65,086,869

4,762,177

52,714,058

10,332,200

16,066,068

0

94,983,796

9,9 16,645

556,417

11 1,480,182

13,354,978

24,037,391

6,945,965

24,726,239

8,099,720

149,871,294

40,071,717

1,811,657

110,877,439

12,057,892

42,914,302

10,400,923

22,7 15,410

5,992,960

135,932,282

Poor HH

1,430,950

54,949,613

90,264

33,749,612

3,051,809

8,181,668

840,131

16,772,002

1,440,936

103,583,13 1

140

Household's Average Annual Income I n Kind (T

Type of Settlement

Total annual income in kind

Total income in kind as wage or salary in the last 12 months

Total net entrepreneurship income in kind in the last 12 months

Total net agricultural income in kind in

Total income in kind from additional job

Total income in kind from al l previous

Rent from real estate income in kind in

Imputed rent for the last 12 months

Income in kind from government in the

Transfer income in kind from abroad in

the last 12 months

in the last 12 months

jobs in the last 12 months

the last 12 months

last 12 months

the last 12 months

Transfer income in kind from other private persons or institutions in the last 12 months

Source: DIE, Turkey 2002 HBS.

Turkey Rural

300,756,381

!04,588,895

39,046,736

414,796

3,205,989

4,823,847

854,378

0

6,021,880

491,855

40,002,97 1

177,267,287

96,291,576

29,247,897

589,529

5,337,639

2,042,993

1,753 8,184

0

9,452,001

102,777

29,925,532

Urban

378,487,433

!72,757,380

45,2 14,68 1

304,809

1,864,208

6,574,275

285,470

0

3,862,767

736,763

46,346,284

Poverty Status

Non-Poor Households

344,929,771

246,762,2 17

44,308,530

458,947

2,909,242

4,856,705

820,816

0

5,565,361

569,959

37,145,3 10

Poor Households

148,208,714

58,948,229

20,875,740

262,326

4,230,773

4,710,377

970,279

0

7,598,415

222,132

49,871,573

141

Appendix 2: Poverty Figures for Various Poverty L ines

The Poverty Headcount According to Various Poverty Lines, Based on Consumption Per Capita

rurkey

Lower than primary

Education o f HH ’ primary lead ’ Secondarylvocational

University

Rural

Urban rype o f settlement

No

Yes Access to land

‘ No

,Yes Own automobile

Zero

One

Two

Three

4 and more

Zero

One

Two and more

Children under age 14

Number o f HH members age >60

Male

Female Gender o f HH head

Dependency ratio n 0-0.25 o f employed (EXCL unpaid

0.25-0.5

0.5 and more family workers)/HHsize

Food Poverty Line TL

?raction o f Poor

.0379

.lo35

.0324

,0054

.0012

.0556

.0261

.0365

,0407

.0487

.0013

.0019

.0107

.O 179

.0906

.1958

.0342

.0298

.0820

.0380

.0352

,0543

.0117

,0016

Zomplete Poverty Line TL

Fraction of Poor

.3 167

S902

.3240

.lo83

,0228

.3989

.26 19

.2832

.3842

.3850

.087 1

.1283

.2304

.3291

S789

.7670

.2989

.37 18

.3569

.3 185

.2905

.3802

,2273

.1144

Relative Poverty i n e 50%

of Median

TL

Fraction of Poor

.2030

.4701

.1887

.0541

.0111

.2700

,1583

.1781

.2532

.2537

.0323

.0594

,1167

.1909

.4151

.6277

.1891

.2266

.2697

.2030

.2028

.2545

,1332

.0243

Absolute Poverty Line $1

PPP Day

Fraction of Poor

.0038

.0158

.002 1

.oooo

.oooo

.0056

.0026

.0044

.0027

.0050

.oooo

.0008

.oooo

.0067

.0040

.0151

.0038

.oo 18

.0078

.0036

.0071

.0057

,0007

.oooo

Absolute Poverty

Line i2.15 PPP

Day

Fraction of Poor

.09 18

.2380

.Of303

,0209

.0012

.1289

.067 1

,0820

.1117

.1179

.0042

.0126

.032 1

.0554

.2440

.3827

.0874

.0700

.1677

.0925

.0823

.1204

.05 10

.0035

4bsolute Poverty Line $4.3 PPP Day

Fraction of Poor

.3893

.6639

.4 105

.1466

.0284

.4822

,3275

.3500

.4687

.4665

.1298

,1792

.3044

.4254

.6705

3276

.3708

.4550

.4 160

.3913

.3613

.46 16

,2887

.1532

Source: DIE, Turkey 2002 HBS.

142

The Poverty Gap Index According to Various Poverty Lines, Based on Consumption Per Capita

Turkey

Education o f HH head

Type o f settlement

Access to land

Own automobile

Children under age 14

Lower than primary

Primary

Secondarylvocationa

University

Rural

Urban

No

Yes

No

Yes

Zero

One

T w o

Three

4 and more

Zero

One

T w o and more

Number o f HH members age >60

Male Gender o f hh head

Female

Dependency ratio G0.25

0.25-0.5

0.5 and more

n o f employed (EXCL unpaid family workers)/HHsize

Food Poverty ,ine TL

Poverty

Index

.0067

.0188

.0057

.0006

.oooo

.0096

,0048

,0075

.0052

.0086

.0003

,0006

,0015

.005 1

.0127

.0343

.0068

.0048

.0094

.0065

.0094

.0096

.002 1

,0002

Gap

Complete Poverty line TL

Poverty

Index

.0982

.2223

.0925

.0264

.005 1

.1304

.0767

,0882

.1184

.1225

.0165

.0286

.OS65

.0883

.2044

.3092

,0917

.lo36

.1401

.0983

.0972

.1236

.0623

.0186

Gap

Relative Poverty

Line 50% of Median

TL

Poverty

Index

.OS48

.1395

.0483

.0123

,0024

.0745

.04 16

,0502

.0640

.0696

.0049

.0110

.0248

.0425

.1244

.2066

.os 10

.os01

.093 1

.OS47

,0558

.07 15

Gap

Absolute Poverty Line $1 PPP Day

Poverty

Index

.0007

,0028

.0004

.oooo

.oooo

.OO 13

.0003

.0007

.0006

.0009

.oooo

.oooo

.oooo

.0017

.0010

.0016

.0006

.0002

.0022

.0007

.0005

.0011

Gap

.0308 .OOOO

.0037 .OOOO

Absolute Poverty

Line $2.15

PPP Day

Poverty

Index

.0200

.OS58

.O 169

,0030

.0003

.0284

.0144

.0195

,021 1

,0257

.0009

.OO 17

.0062

.0116

.0485

.0945

.O 187

.0162

.0375

.0200

.0202

,0280

.0076

.0006

Gap

4bsolute Poverty ,ine $4.3 PPP Day

Poverty

Index

.1288

.2717

.1254

.0384

.0076

.1676

.1029

.1156

,1554

.1589

.0275

.0433

,0817

.1228

.2559

.3684

.1210

.1406

.1693

.1290

.1253

.1593

.0857

,0322

Gap

Source: DIE, Turkey 2002 HBS.

143

The Poverty Severity Index According to Various Poverty Lines, Based on Consumption Per Capita, Based

rurkey

Education o f HH head

Type o f settlement

Access to land

Own automobile

Children under age 14

Number o f HH members age >60

Gender o f HH head

Dependency ratio n o f Employed (EXCL unpaid family workers)/HHsize

Lower than primary

Primary

Secondarylvocational

University

Rural

Urban

No

Yes

No

Yes

Zero

One

Two

Three

4 and more

Zero

One

Two and more

Male

Female

0-0.25

0.25-0.5

0.5 and more

on HH Consumption per Capita

Food Poverty Line T L

Poverty Severity Index

,002 1

,0065

.OO 16

.ooo 1

.oooo

.0032

.0013

.0023

.OO 16

.0026

.0001

.0002

.0003

.0023

,0036

.0095

.002 1

.oo 12

.0033

.0020

.0030

,0030

.0005

.oooo

Complete Poverty L ine T L

Poverty Severity Index

.0423

.lo48

.0381

,0098

.0018

.0575

.0322

.0389

.0493

.0535

.0047

.0092

.0202

.0339

.0937

.1555

,0396

,0402

.0683

.0423

.0430

.055 1

.0239

,0044

Relative Poverty Ane 50%

of Median

TL

Poverty Severity Index

.0214

.OS72

.0185

.0041

.0007

.0299

.0158

.0203

,0237

.0274

.OO 13

.003 1

.008 1

.0148

.0499

.09 13

.0201

.0179

.0385

,0214

.0222

.0289

.0102

Absolute Poverty L ine $1

PPP Day

Poverty Severity Index

.0002

.0008

.0001

.oooo

.oooo

.0004

.oooo

.0002

.0002

.0002

.oooo

.oooo

.oooo

.0005

.0004

.0003

.0002

.oooo

.0006

.0002

.0001

.0003

.oooo

.0011 .oooo

Absolute Poverty

Line i2.15 PPP

Day

Poverty Severity Index

.0068

.o 195

.0056

.0007

.0001

.0098

.0048

.0070

.0063

.0087

.0003

,0006

.0017

.0047

.0146

Absolute Poverty Line $4.3 PPP Day

Poverty Severity Index

.0584

.1371

.0541

.0149

,0028

.0783

.0452

.053 1

.0692

.0733

.0086

.0153

.0312

.0501

.1246

,0331 .1971

.0065

.005 1

.0119

.0067

.0080

.0096

,0022

.0002

.0547

.0588

.0879

.0584

.0585

,0746

.0352

.0092

Source: DIE, Turkey 2002 HBS.

144

The Relative Poverty R i s k s According to Various Poverty Lines,

rurkey

Education o f HH head

rype o f settlement

Access to land

Own automobile

Children under age 14

Number o f HH members age >60

Gender o f HH head

Based on Consurr

Lower than primary

Primary

Secondarylvocational

University

Rural

Urban

No

Yes

No

Yes

Zero

One

Two

Three

4 and more

Zero

One

Two and more

Male

Female

Dependency ratio n o f 0-0.25

workers)/ HH size

Source: DIE, Turkey 2002 HBS.

0.5 and more

Relative Risk

.oo 1.73

-.14

-.86

-.97

.47

-.3 1

-.04

.07

.29

-.97

-.95

-.72

-.53

1.39

4.17

-.lo -.2 1

1.17

.oo -.07

.43

-.69

-.96

t i o i Per Capita

Relative Risk

.oo -86

.02

-.66

-.93

.26

-.17

-.11

.2 1

.22

-.72

-.60

-.27

.04

3 3

1.42

-.06

.17

.13

.o 1

-.08

.20

-.28

-.64

Relative Risk

.oo 1.32

-.07

-.73

-.95

.33

-.22

-.12

.25

.25

-.84

-.7 1

-,42

-.06

1 .os 2.09

-.07

.12

.33

.oo

.oo

.25

-.34

- 3 8

Re1 ative Risk

.oo 3.13

-.45

-1.00

-1.00

.47

-.3 1

.14

-.28

.30

-1.00

-30

-1 .oo .75

.03

2.95

-.01

-.52

1.03

-.06

.86

S O

-.82

-1 .oo

Relative Risk

.oo 1.59

-.13

-.77

-.99

.40

-.27

-.11

.22

.28

-.95

-.86

-.65

-.40

1.66

3.17

-.05

-.24

.83

.01

-.lo .3 1

-.44

-.96

Relative Risk

.oo .7 1

.05

-.62

-.93

.24

-.16

-.lo .20

.20

-.67

-.54

-.22

.09

.72

1.13

-.os ' .17

.O?

.oo -.07

.19

-.26

-.61

145

The Relative Poverty R i s k s According to Various Poverty Lines,

Turkey

Education o f HH head

Type o f settlement

Access to land

Own automobile

Children under age 14

Number o f HH members age >60

Gender o f HH head

Based on Consumption Per Capita

Lower than primary

Primary

Secondarylvocational

Dependency ratio n o f employed (EXCL unpaid family workers)/HH size

Source: DIE, Turkey 2002 HBS.

University

Rural

Urban

N o

Yes

N o

Yes

Zero

One

Two

Three

4 and more

Zero

One

Two and more

Male

Female

0-0.25

0.25-0.5

0.5 and more

Relative Risk

Index

1 .oo 2.73

.86

.14

.03

1.47

.69

.96

1.07

1.29

.03

.05

.28

.47

2.39

5.17

.90

.79

2.17

1 .oo .93

1.43

.3 1

.04

Relative Risk

Index

1 .oo 1.86

1.02

.34

.07

1.26

.83

.89

1.21

1.22

.28

.40

.73

1.04

1.83

2.42

.94

1.17

1.13

1.01

.92

1.20

.72

.36

Relative Risk

Index

1 .oo 2.32

.93

.27

.05

1.33

.78

.88

1.25

1.25

.16

.29

.58

.94

2.05

3.09

.93

1.12

1.33

1 .oo 1 .oo 1.25

.66

.12

Relative Risk

Index

1 .oo 4.13

.55

.oo

.oo 1.47

.69

1.14

.72

1.30

.oo

.20

.oo 1.75

1.03

3.95

.99

.48

2.03

.94

1.86

1.50

.18

.oo

Relative Risk

Index

1 .oo 2.59

.87

.23

.o 1

1.40

.73

.89

1.22

1.28

.05

.14

.35

.60

2.66

4.17

.95

.76

1.83

1.01

.90

1.31

.56

.04

Relative Risk

Index

1 .oo 1.71

1.05

.38

.07

1.24

.84

.90

1.20

1.20

.33

.46

.78

1.09

1.72

2.13

.95

1.17

1.07

1 .oo .93

1.19

.74

.39

146

The Poverty Headcount According to Various Poverty Lines, Based on Consumption Per Adult Equivalent Adjusted

Turkey

Education o f HH head

Type o f settlement

Access to land

OWn automobi 1 e

Children under age 14

Number o f HH members age >60

Gender o f hh head

Dependency ratio n o f employed (EXCL unpaid family workers)/HH size

Lower than primary

Primary

Secondary /vocational

University

Rural

Urban

No

Yes

No

Yes

Zero

One

Two

Three

4 and more

Zero

One

Two and more

Male

Female

C0.25

0.25-0.5

0.5 and more

Source: DIE, Turkey 2002 HBS.

PO, Food Poverty Line, Adjusted Ad. Eq. Measures

Fraction of Poor

.0135

.0304

.0133

,0019

.oooo ,020 1

.0092

,0145

.01 I 6

,0174

.0007

,0043

,0077

,0125

,0237

,0460

,0150

.0075

,0129

,0128

,0235

,0186

,0059

.oooo

PO, Complete Poverty Line,

Adjusted Ad. Eq.

Measures

Fraction of Poor

,2696

.5245

,2709

.0915

.O 160

,3448

,2195

,2466

.3 I62

,3313

,0623

. I594

,2010

.2702

,4678

,5395

,2588

,2800

,3366

,2662

.3197

,3163

,2034

,1241

PO, Relative Poverty Line,

Adjusted Ad. Eq.

Measures

Fraction of Poor

,1474

,3238

,1406

.0423

.0095

,1986

,1133

.I391

.I641

. I852

.0202

,0735

,0925

,1277

,2946

.3781

,1404

,1291

.2367

,1458

,1699

,1746

,1122

,0450

PO, Poverty Line=$l

PPP=663515 TLlday,

Adjusted Ad. Eq.

Measures

Fraction of Poor

,0021

.0084

,0013

.oooo

.oooo ,0046

,0005

,0018

.0027

.0028

.oooo ,0008

.oooo ,0066

.0027

.0003

,001 8

.0005

.0078

,0022

.0008

,003 I

,0006

.oooo

PO, Poverty Line=$2.15

PPF1426686 TL/day, Adjusted Ad. Eq.

Measures

Fraction of Poor

,041 1

.0807

,0429

.0060

,001 2

,0533

,0330

.0456

,0320

.0525

,0028

,0131

.0178

.0347

.0869

,1426

.0436

,0315

,0386

,0389

,0729

.0535

,0212

,0135

PO, Poverty Line=$4.3

PPP=2853313 TLIday, Adjusted Ad. Eq.

Measures

Fraction of Poor

,3414

.5985

,3568

.I243

,0267

.43 13

,2815

,3102

.4044

.4 129

. I O 1 1

,2201

.2741

,3526

S458

.6112

,3244

.3867

,3939

.3388

,3792

,3880

,2823

,1604

147

The Poverty Gap Index According to Various Poverty Lines, Based on Consumption Per Adult Equivalent Adjusted

I'urkey

Lower than primary

Education of Primary

HH head Secondary1 vocational

University

Type o f settlement

Access to land

OWn automobile

Children under age 14

Number o f HH members age >60

Gender of HH head

Rural

Urban

No

Yes

No

Yes

Zero

One

Two

Three

4 and more

Zero

One

Two and more

Male

Female

P1, Food Poverty

Line, Adjusted Ad. Eq.

Measures

Poverty Gap Index

,0026

.008 1

,002 1

,0001

.oooo ,0043

,0015

,0029

,002 1

,0034

,0001

,0009

.0009

.0041

,0046

,0062

,0028

,001 1

.0041

.0025

,0043

P1, Complete Poverty Line,

Adjusted Ad. Eq.

Measures

Poverty Gap Index

.0688

.1475

.0667

,0191

.0036

,0923

.053 1

,0649

.0765

.0862

.0102

,0345

,0444

,0640

,1315

.1695

,0667

,0635

.0953

.0673

.0897

P1, Relative Poverty Line,

Adjusted Ad. Eq.

Measures

Poverty Gap Index

.03 13

,0696

,0301

,0073

.0010

,043 1

.0234

.03 10

.03 18

.0398

,0029

,0119

.0184

.0273

,0665

,0897

,0312

,0249

,0442

,0304

,0446

P1, Poverty Line=$l

PPP=663575 TLlday, Adjusted Ad. Eq.

Measures

Poverty Gap Index

.0004

,0012

.0003

.oooo

.oooo

.0009

.oooo ,0004

,0003

,0005

.oooo ,0001

.oooo ,001 1

,0007

.0001

,0004

.oooo ,0009

,0004

.0001

P1, Poverty Line=$2.15

PPF1426686 TLlday , Adjusted Ad. Eq.

Measures

Poverty Gap Index

.0083

.0200

,0078

.0009

.ooo 1

.0117

.0060

,0092

,0064

,0106

,0004

,0024

.0037

.0086

.0162

,0268

,0087

,0054

,0095

,0078

,0148

P1, Poverty Line=$4.3

PPP=2853373 TLlday, Adjusted Ad. Eq.

Measures

Poverty Gap Index

.0973

.1975

,0964

,0298

,0059

.1282

,0767

.0907

,1107

.1207

.0185

,0530

.0679

,0939

,1763

.2191

,0935

.0970

,1280

,0957

,1212

Source: DIE, Turkey 2002 HBS.

148

The Poverty Severity Index According to Various Poverty Lines, Based on Consumption Per Adult Equivalent Adjusted

Turkey

Education o f HH head

Type o f settlement

Access to land

Own automobile

Children under age 14

Number o f HH members age >60

Lower than primary

Primary

Secondary /vocational

University

rural

urban

No

Yes

No

Yes

Zero

One

Two

Three

4 and more

Zero

One

Two and more

Gender o f male

HH head female

Dependency 0 - 0.25 ratio n o f employed (EXCL unpaid family 0.5 and more workers)/HH size

0.25 - 0.5

P2, Food Poverty Line,

Adjusted Ad. Eq.

Measures

Poverty ieverity Index

.0008

,0028

.0006

.oooo

.oooo

.0016

,0003

,0009

,0007

,001 1

.oooo ,0003

.0001

.0018

.OO 14

,0012

,0008

,0003

.0017

,0008

,001 1

,0012

,0002

.oooo

P2, Complete Poverty Line,

Adjusted Ad. Eq.

Measures

Poverty Severity Index

.0253

,0562

.0243

,0061

.0010

.0347

,0190

,0249

.0262

,0320

,0028

.0109

,0151

,0232

,0508

,0690

,0250

,0212

,0352

,0246

,0356

.03 13

,0169

,0063

P2, Relative ?overty Line,

Adjusted Ad. Eq.

Measures

Poverty ieverity Index

.0104

.0242

.0099

,0018

,0002

.0147

.0076

,0109

,0095

,0133

,0007

,0035

.0056

.0100

,0215

.03 13

.O 107

,0076

.0136

.o 100

,0165

,0136

.0057

,0019

P2, Poverty Line=$l

PPP=663575 TLlday, Adjusted Ad. Eq.

Measures

Poverty everity Index

.0001

,0002

.0001

.oooo

.oooo

.0002

.oooo

.0001

.oooo

.0001

.oooo

.oooo

.oooo ,0002

.0002

.oooo

.0001

.oooo

.0001

.0001

.oooo ,000 1

.oooo

.oooo

P2, Poverty Line=$2.15

PPP=1426686 TLlday, Adjusted Ad. Eq.

Measures

Poverty Severity Index

,0027

.0075

.0023

.0002

.oooo ,0042

.0017

,0030

,0021

.0035

.0001

,0008

,0010

.0037

,0050

,0074

,0029

,0014

,0038

,0026

.0045

.0038

,001 0

.0002

P2, Poverty Line=$4.3

'PP=2853373 TLIday, Adjusted Ad. Eq.

Measures

Poverty everity Index

,0384

.0826

,0373

.0102

.oo 19

.05 19

,0294

.0368

,0415

.0482

,0054

,0183

,0243

,0358

.0742

,0975

,0375

,0345

,0525

,0375

,0514

.0466

,0270

,0116

Source: DIE, Turkey 2002 HBS.

149

The Relative Poverty R i s k s According to Various Poverty Lines, Based on Consumption Per Adult Equivalent Adjusted

Turkey

Education of HH head

Type o f settlement

Access to land

Own automobile

Children under age 14

Number of HH members age >60

Gender of HH head

Dependency ratio n o f employed (EXCL unpaid family workers)/HH size

Lower than primary

Primary

Secondary /vocational

University

Rural

Urban

No

Yes

No

Yes

Zero

One

Two

Three

4 and more

Zero

One

Two and more

Ma le

Female

0-0.25

0.25-0.5

0.5 and more

Relative Risk

.oo

1.24

-.02

-.86

-1.00

.49

-.32

.07

-.I4

.28

-.95

-.68

-.43

-.08

.75

2.40

.ll

-.45

-.05

-.05

.74

.37

-.57

-1.00

telative Risk

.oo

.95

.oo -.66

-.94

.28

-.I9

-.09

. I7

.23

-.77

-.41

-.25

.oo

.73

1 .oo -.04

.04

.25

-.01

.19

. I7

-.25

-.54

Relative Risk

.oo

1.20

-.05

-.71

-.94

.35

-.23

-.06

.I1

.26

-.86

-.50

-.37

-.I3

1 .oo 1.57

-.05

-.I2

.61

-.01

.15

.18

-.24

-.69

Relative Risk

.oo

2.93

-.40

-1.00

-1.00

1.16

-.78

-.14

.29

.30

-1.00

-.64

-1 .oo 2.10

.25

-.87

-.16

-.76

2.65

.04

-.61

.45

-.71

-1 .oo

telative Risk

.oo

.96

.04

-.85

-.97

.30

-.20

.I 1

-.22

.28

-.93

-.68

-.57

-.I5

1.11

2.47

.06

-.23

-.06

-.05

.77

.30

-.48

-.67

belative Risk

.oo

.75

.04

-.64

-.92

.26

-.18

-.09

.18

.2 1

-.70

-.36

-.20

.03

.60

.79

-.05

.13

.15

-.01

.11

.14

-.17

-.53

Source: DIE, Turkey 2002 HBS.

150

The Relative Poverty R i s k s According to Various Poverty Lines,

Turkey

Education o f HH head

Type o f settlement

Access to land

Own automobile

Children under age 14

' Number o f HH members age >60

Gender o f HH head

Dependency ratio n o f employed (EXCL unpaid family workers)/HH size

Based on Consumption Per Aduk Equivalent Adjusted

Lower than primary

Primary

Secondary1 vocational

University

Rural

Urban

No

Yes

No

Yes

Zero

One

Two

Three

4 and more

Zero

One

Two and more

Male

Female

0-0.25

0.2 5-0.5

0.5 and more

Xelative Risk Index

1 .oo 2.24

.98

.14

.oo 1.49

.68

1.07

.86

1.28

.05

.32

.57

.92

1.75

3.40

1.11

.55

.95

.95

1.74

1.37

.43

.oo

ielative Risk Index

1 .oo 1.95

1 .oo

.34

.06

1.28

.81

.9 1

1.17

1.23

.23

.59

.75

1 .oo 1.73

2.00

.96

1.04

1.25

.99

1.19

1.17

.75

.46

Zelative Risk Index

1 .oo 2.20

.95

.29

.06

1.35

.77

.94

1.11

1.26

.I4

s o .63

.87

2.00

2.57

.95

.88

1.61

.99

1.15

1.18

.76

.3 1

Relative Risk index

1 .oo 3.93

.60

.oo

.oo 2.16

.22

.86

1.29

1.30

.oo

.36

.oo 3.10

1.25

.13

.84

.24

3.65

1.04

.39

1.45

.29

.oo

ielative Risk

Index

1 .oo 1.96

1.04

.15

.03

1.30

.80

1.11

.78

1.28

.07

.32

.43

.85

2.1 1

3.47

1.06

.77

.94

.95

1.77

1.30

.52

.33

telativc Risk Index

1 .oo 1.75

1.04

.36

.08

1.26

.82

.91

1.18

1.21

.30

.64

.80

1.03

1.60

1.79

.95

1.13

1.15

.99

1.11

1.14

.83

.47

Source: DIE, Turkey 2002 HBS.

151

Turkey

Lower than primary

Primary Education o f HH head Secondary

/vocational

University

Type of Rural settlement Urban

Access to No Yes land

Own No automobile Yes

Zero

One Children under age 14 Two

Three

4 and more

Number o f Zero

One HH members age >60 Two and more

Gender o f Male

HH head Female

Dependency 0-0.25

0.25-0.5 ratio n o f employed (EXCL unpaid family 0.5 and more workers)/HH size

Source DIE, Turkey 2002 HBS.

The Poverty Headcount According to Various Poverty Lines, Based on Consumption Per Adult Equivalent Adjusted

PO, Food Poverty

Line, OECD Ad. Eq.

Measures

Fraction of Poor

,0044

,0189

.0023

.oooo

.oooo

.0065

,0030

,0047

,0038

.0057

.oooo ,0019

.0005

,007 1

.0043

,0151

.0046

.0019

,0078

,0042

,0078

.0062

,0017

.oooo

PO, Complete Poverty

Line, OECD Ad. Eq.

Measures

Fraction of Poor

.I597

,4082

,1403

,0385

.0059

,2201

.I 195

,1382

,2032

,2010

.0208

,0658

,0956

,1400

,3114

,4679

.1445

.I708

.2612

,1587

.1754

,1965

.I 129

.O 176

'0, Relative Poverty

Line, OECD Ad. Eq.

Measures

Fraction of Poor

.0814

.2 186

.0696

,0170

,0012

.I214

.0548

,0700

,1045

,1044

.0039

.0253

.0430

,0506

,1992

,2786

,0719

,0755

,1685

,0824

,0673

.I062

,0460

,0049

PO, Poverty Line=$l

PPP=66357 5 TLIday,

OECD Ad. Eq.

Measures

Fraction o f Poor

,0002

,0015

.oooo

.oooo

.oooo

.0006

.oooo ,0004

.oooo

.0003

.oooo

.oooo

.oooo

.oooo ,0021

.oooo ,0003

.oooo

.oooo

.0003

.oooo ,0004

.oooo

.oooo

PO, Poverty Line =$2.15 PPP=14266 86 TLIday,

OECD Ad. Eq.

Measures

Fraction of Poor

.0204

.05 18

.0188

.0013

.oooo ,0264

.O 163

,0235

,0141

,026 1

,0012

,003 1

,0089

.0136

.0398

,0926

,0205

,0173

,0248

,0202

,0233

.0285

.0074

,0016

PO, Poverty Line=$4.3

PPP=2853373 TLIday, OECD Ad. Eq.

Measures

Fraction of Poor

.2151

.49 10

,2026

.0534

,0116

,2926

,1634

.I850

,2758

,2687

,0349

.1103

,1473

,1940

.3898

,5423

,1983

.2394

.3 044

.2 147

,2206

,2572

,1610

,0545

152

The Poverty Gap Index According to Various Poverty Lines, Based on Consumption Per Adult Equivalent Adjusted

Turkey

Education o f HH head

Type of settlement

Access to land

OWn automobile

Children under age 14

Number of HH

Lower than primary

Primary

Secondaryivocational

University

Rural

Urban

No

Yes

No

Yes

Zero

One

Two

Three

4 and more

Zero

One members age >60 Two and more

Gender o f Male

HH head Female

Source: DIE, Turkey 2002 HBS.

P1, Food Poverty

Line, OECD Ad. Eq. Measures

Poverty

Index

.0010

,0045

.0005

.oooo

.oooo ,0019

.0005

.0010

.0011

.OO 13

.oooo

.0003

.0001

.0024

,0013

.002 1

.0010

,0003

.0030

.0010

,0010

Gap

PI, Zomplete Poverty

Line, OECD Ad. Eq. Measures

Poverty

Index

,0384

.lo24

.033 1

.0078

,0010

.0553

.0272

.0345

.0465

,0489

,003 1

.0124

.0206

,0279

.OS57

.1297

.0349

.0368

,0700

.0386

.0363

Gap

PI, Relative Poverty

Line, OECD Ad. Eq. vleasures

Poverty

Index

,0166

.0467

.0139

,0022

.0003

.0246

.0112

.0157

.0183

.0213

.0007

,0036

.0075

.0107

.0389

.0653

.0152

.0144

.03 16

.0166

.0165

Gap

P1, Poverty Line=$l

PP=663575 TLIday,

3ECD Ad.

Measures

'overty Gap Index

.oooo

.0002

.oooo

.oooo

.oooo

.0001

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.0002

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

Eq-

P1, Poverty Line=$2.15 'PP=1426686

TLIday, OECD Ad. :q. Measures

Poverty Gap Index

.0039

.0119

.003 1

.0001

.oooo

.0061

.0024

.004 1

.0034

.0050

.0002

.0007

.0014

.0042

.0073

.0143

.0038

.0028

.006 1

.0038

.0053

P1, Poverty Line=$4.3 PP=2853373

TLIday, OECD Ad. :q. Measures

'overty Gap Index

.0563

.1440

.0497

.0124

.002 1

,0793

.0410

.0496

.0698

.07 13

.0059

.02 12

.0330

.0446

,1174

.1747

.05 1 1

.0577

.0953

.OS64

,0554

153

The Poverty Severity Index According to Various Poverty Lines, Based on Consumption Per Adult Equivalent Adjusted

Turkey

Education o f HH head

Type of settlement

Access to land

O W automobile

Children under age 14

Number o f HH members age >60

Gender of hh head

Dependency ratio n o f employed (EXCL unpaid family workers)/HH size

Lower than primary

Primary

Secondary /vocational

University

Rural

Urban

No

Yes

No

Yes

Zero

One

Two

Three

4 and more

Zero

One

Two and more

Male

Female

Cb0.25

0.254.5

0.5 and more

Source: DIE, Turkey 2002 HBS.

P2, Food Poverty

Line, OECD Ad. Eq.

Measures

Poverty Severity Index

,0003

,0014

,0002

.oooo

.oooo

.0006

.0001

,0003

,0004

,0004

.oooo

.ooo 1

.oooo ,0008

,0005

,0004

,0003

,0001

,001 1

,0003

,0002

.0005

.0001

.oooo

P2, Complete Poverty Line, OECD Ad.

Eq. Measures

Poverty Severity

Index

,0135

.0374

,0114

,0022

.0002

,0199

,0093

.0126

,0153

.O 173

,0008

,0035

,0065

.0096

.0309

,0494

.0124

,0119

,0253

,0136

,0131

.0180

,0068

,0012

P2 Relative Poverty

Line, OECD Ad. Eq.

Measures

Poverty Severity

Index

.0052

,0153

.0043

,0005

,0001

,0079

,0034

,0052

.0052

.0067

.0002

,0010

.002 1

,0044

.0115

,0200

,0049

,004 I

,0096

,0052

,0058

,0073

,0020

,0003

P2, Poverty Line=%l

PPP=663575 TLlday, OECD Ad. Eq.

Measures

Poverty Severity

Index

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

.oooo

P2, Poverty Line=$2.15

?PP=1426686 TLIday, OECD Ad. Eq.

Measures

Poverty ieverity Index

,0012

,0042

,0008

.oooo

.oooo

.0020

. O O M

,0012

,001 1

.0015

.oooo ,0003

,0003

.0019

.0020

,0033

.001 I

.0006

.0025

.0011

.0014

,0016

,0004

.oooo

P2, Poverty Line=%4.3

PPP=2853373 TL/day, OECD

Ad. Eq. Measures

Poverty Severity Index

,021 1

.0568

,0182

.0040

.0005

,0306

,0149

.O 193

,0249

,0270

,0016

,0065

.0110

,0156

.0469

,0727

.0193

.o 199

.0383

.0212

,0205

,0275

.0120

,0021

154

Turkey

Education o f HH head

Type o f settlement

Access to land

Own automobile

Children under age 14

The Relative Poverty R i s k s According to Various Poverty Lines, Based on Consumption Per Adult Equivalent Adjusted

Lower than primary

Primary

Secondary1 vocational

University

Rural

Urban

No

Yes

N o

Yes

Zero

One

Two

Three

4 and more

Zero

Number o f HH members age One >60

Two and more

Male

Female

0-0.25

Gender o f hh head

Dependency ratio n o f employed (EXCL unpaid 0.25-0.5 family workers)iHH size

Source DIE, Turkey 2002 HBS.

0.5 and more

Relative Risk

.oo

3.28

-.49

-1.00

-1.00

.47

-.3 1

.07

-.14

.30

- 1 .oo -.58

-.89

.61

-.02

2.41

.04

-.56

.76

-.05

.76

.40

-.61

-1.00

Relative Risk

.oo

1.56

-.12

-.76

-.96

.38

-.25

-.13

.27

.26

-.87

-.59

-.40

-.12

.95

1.93

- . lo .07

.63

-.01

.10

.23

-.29

-.89

Relative Risk

.oo

1.69

-.14

-.79

-.99

.49

-.33

-.14

.28

.28

-.95

-.69

-.47

-.38

1.45

2.42

-.12

-.07

1.07

.01

-.17

.30

-.43

-.94

Relative Risk

.oo

5.36

-1.00

-1 .oo

-1.00

1.50

-1.00

S O

-1.00

.30

-1.00

-1.00

-1.00

-1.00

7.72

-1.00

.36

-1 .oo

-1.00

.07

-1 .oo .59

-1.00

-1.00

Relative Risk

. 00

1.54

-.08

-.93

- 1 a 0

.30

-.20

. I 5

-.3 1

.28

-.94

-.85

-.56

-.33

.95

3.55

.01

-.15

.22

-.01

.14

.40

-.64

-.92

Relative Risk

.oo

1.28

-.06

-.75

-.95

.36

-.24

-. 14

.28

.25

-.84

-.49

-.32

-. 10

.81

1.52

-.08

.I 1

.42

.oo

.03

.20

-.25

-.75

155

The Relative Poverty R i s k s According to Various Poverty Lines, Based on Consumption Per Adult Equivalent Adjusted

Turkey

Education o f HH head

Type o f settlement

Access to land

Own automobile

Children under age 14

Number of HH members age >60

Gender o f hh head

Dependency ratio n o f employed (EXCL unpaid family workers)/ HH size

Lower than Primary Primary

Secondary1 vocational

University

Rural

Urban

No

Yes

No

Yes

Zero

One

Two

Three

4 and more

Zero

One

Two and more

M a l e

Female

C0.25

0.25-0.5

0.5 and more

Relative Risk

Index

1 .oo

4.28

.5 1

.oo

.oo 1.47

.69

1.07

.86

1.30

.oo

.42

.11

1.61

.98

3.41

1.04

.44

1.76

.95

1.76

1.40

.39

.oo

Relative Risk Index

1 .oo

2.56

.88

.24

.04

1.38

.75

.87

1.27

1.26

.13

.4 1

.60

.88

1.95

2.93

.90

1.07

1.63

.99

1,lO

1.23

.71

.ll

Relative Risk Index

1 .oo

2.69

.86

.2 1

.01

1.49

.67

.86

1.28

1.28

.05

.3 1

.53

.62

2.45

3.42

.88

.93

2.07

1.01

.83

1.30

.57

.06

Relative Risk

Index

1 .oo

6.36

.oo

.oo

.oo 2.50

.oo 1.50

.oo 1.30

.oo

.oo

.oo

.oo 8.72

.oo 1.36

.oo

.oo

1.07

.oo 1.59

.oo

.oo

Relative Risk

Index

1 .oo

2.54

.92

.07

.oo 1.30

.80

1.15

.69

1.28

.06

.15

.44

.67

1.95

4.55

1.01

.85

1.22

.99

1.14

1.40

.36

.08

Relative Risk

Index

1 .oo

2.28

.94

.25

.05

1.36

.76

.86

1.28

1.25

.16

.5 1

.68

.90

1.81

2.52

.92

1.11

1.42

1 .oo 1.03

1.20

.75

.25

Source: DIE, Turkey 2002 HBS.

156

Appendix 3: Sensitivity of Poverty to the Minimum Food Basket Caloric Requirements, CPI Source, Size Economies’ and Equivalence Scales Parameters

C P I DIE

Poverty Shortfall Index

kciden. Poverty

P1 Poverty Gap Index

157

Alpha = 0.9 Theta = 0.6 Kcal = 2,100

P2 Poverty Severity Index

PO Poverty Incident

Food Poverty Line

Complete Poverty Line

I

Adult equivalent 0.001 1 0.0013 0.0008 0.0010 Adjusted adult equivalent OECD 0.0005 0.0006 0.0003 0.0004 Per capita 0.0468 0.0461 0.0423 0.0426 Adult equivalent 0.0288 0.0287 0.0253 0.0259

equivalent OECD 0.0155 0.0155 0.0135 0.0139 . Adjusted adult

t--

Food Poverty Line

Poverty :. Index

Per capita 0.1894 0.1943 0.1775 0.1877 Adult equivalent 0.1870 0.2 125 0.1939 0.2037 Adjusted adult eauivalent OECD 0.2171 0.2367 0.2337 0.25 10 Poverty

Shortfall Index Complete

Poverty Line

Per capita 0.3 148 0.3 180 0.3101 0.3123 Adult equivalent 0.2638 0.2664 0.255 1 0.2638 Adjusted adult equivalent OECD 0.2430 0.2409 0.2406 0.2438 .

158

Alpha = 1 Theta = 0.6 Kcal = 2450

Per capita Food Adult equivalent Poverty Adjusted adult Line equivalent OECD

I CPI DIE CPI Survey

Imputed Rent Reported Imputed Rent Reported by Regression Rent by HH by Regression Rent by HH

0.0714 0.0752 0.0596 0.0653 0.0306 0.0342 0.0252 0.0274

0.0153 0.0147 0.0131 0.0143 1

~ n ~ i d e n Poverty t

Complete Povertv

P1 Poverty Gap Index

Per capita 0.4324 0.4251 0.4 184 0.4083

0.3906 0.3788 0.3652 0.3570 Adult equivalent

P2 Poverty Severity Index

159

Alpha = 1 Theta = 0.6 Kcal = 2100 1

I Per capita t- CPI DIE CPI Survey

Imputed Rent Reported Imputed Rent Reported by Regression Rent by HH by Regression Rent by HH

0.0438 0.0462 0.0379 0.0388

PO Poverty Incident

Poverty Gap Index

I

Line

Food 'Over@ Line

Poverty Severity ~ n ~ e ~

equivalent OECD 0.0155 0.0158 0.0136 0.0139 Per capita 0.1894 0.1943 0.1775 0.1877 Adult equivalent 0.1870 0.2080 0.1881 0.1961 Adjusted adult eauivalent OECD 0.2171 0.2367 0.2337 0.25 10

I

Poverty Shortfall Index Complete

Poverty Line I

Per capita 0.3 146 0.3 153 0.3097 0.3119 Adult equivalent 0.2624 0.2658 0.2570 0.2613 Adjusted adult equivalent OECD 0.2430 0.24 15 0.2415 0.2435

160

Appendix 4: Regression Analysis

Descriptive Model Variables Enteredmemoved (b,c)

Model Variables Entered

Do you have in your dwelling-Closed garage, DHEAT-4, DDWEL-5, DDWEL-4, Do you have in your dwelling-Electricity, secondary education o f HH head, DDWEL-7, DDWEL-1, DDWEL-9, Do you have in your dwelling-Heating from ground, South eastern Anatolia, HH head i s female, DDWAGE-3, hh head i s unemployed, DDWEL-8, Do you have in your dwelling-Satellite antenna, Do you have in your dwelling-Waste disposal, Eastern Anatolia, DDWEL-10, higher education of HH head, Central Anatolia, DDWAGE-1, University, master, doctorate education of HH head, How many rooms are there in your dwelling, DHEAT-3, Aegean, DDWAGE-2, DDWEL-3, Mediterranean, DDWAGE-5, D o you have in your dwelling-Piped water system, children under age 14 , Do you have in your dwelling-Kitchen, Rural Household, DHEAT-2, Black sea, Do you have in your dwelling-Hot water, Do you have in your dwelling-Toilet (indoors), Do you have in your dwelling-Bathroom, Do you have in your dwelling-Natural gas, AE adjusted by modal hh (2ad + 2 ch), How many square meters i s the utilized area (d), DDWEL-2, Do you have in your dwelling-Central heating(a)

1

4. Al l requested variables entered.

3. Dependent Variable: LNF.

Z. Weighted least squares regression-weighted by population weight.

Method Variables Removed

Enter

Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate

1 .681(a) .464 .464 57.89849

A Predictors: (Constant), Do you have in your dwelling-Closed garage, DHEAT-4, DDWEL-5, DDWEL-4, Do you have in your dwelling-Electricity, secondary education of HH head, DDWEL-7, DDWEL-1, DDWEL-9, Do you have in your dwelling-Heating from ground, South eastem Anatolia, HH head i s female, DDWAGE-3, hh head i s unemployed, DDWEL-8, Do you have in your dwelling-Satellite antenna, Do you have in your dwelling-Waste disposal, Eastern Anatolia, DDWEL-10, higher education o f HH head, Central Anatolia, DDWAGE-1, University, master, doctorate education of HH head , How many rooms are there in your dwelling, DHEAT-3, Aegean, DDWAGE-2, DDWEL-3, Mediterranean, DDWAGE-5, Do you have in your dwelling-Piped water system, children under age 14 , Do you have in your dwelling-Kitchen, Rural Household, DHEAT-2, Black sea, Do you have in your dwelling-Hot water, Do you have in your dwelling-Toilet (indoors), Do you have in your dwelling- Bathroom, D o you have in your dwelling-Natural gas, AE adjusted by modal hh (2ad + 2 ch), How many square meters i s the utilized area (d), DDWEL-2, Do you have in your dwelling-Central heating

161

ANOVA(b,c) Model Sum of Squares Df Mean Square

Regression 198,585,252,725,405 44 4,5 13,301,198,305

1 Residual 229,269,350,347,546 68,392,987 3,352,235

Total 427,854,603,072,951 68,393,03 1

F

1,346,355,937

a. Predictors: (Constant), Do you have in your dwelling-Closed garage, DHEAT-4, DDWEL-5, DDWEL-4, Do you have in your dwelling-Electricity, secondary education o f HH head, DDWEL-7, DDWEL-1, DDWEL-9, Do you have in your dwelling-Heating from ground, South eastern Anatolia, HH head i s female, DDWAGE-3, hh head i s unemployed, DDWEL-8, Do you have in your dwelling-Satellite antenna, Do you have in your dwelling-Waste disposal, Eastern Anatolia, DDWEL-10, higher education o f HH head, Central Anatolia, DDWAGE-1, University, master, doctorate education o f HH head , How many rooms are there in your dwelling, DHEAT-3, Aegean, DDWAGE-2, DDWEL-3, Mediterranean, DDWAGE-5, Do you have in your dwelling-Piped water system, children under age 14 , Do you have in your dwelling-Kitchen, Rural Household, DHEAT-2, Black sea, Do you have in your dwelling-Hot water, Do you have in your dwelling-Toilet (indoors), Do you have in your dwelling-Bathroom, Do you have in your dwelling-Natural gas, AE adjusted by modal hh (2ad + 2 ch), How many square meters i s the utilized area (m2), DDWEL-2, Do you have in your dwelling-Central heating.

b. Dependent variable: LNF.

c. Weighted least squares regression-weighted by population weight.

Coefficients (a,b)

Model

1 (Constant)

Rural Household

Aegean

Mediterranean

Central Anatolia

Black sea

Eastern Anatolia

South eastern Anatolia

Children under age 14

Secondary education of HH head

Higher education of HH head

University, master, doctorate education of HH head

HH head i s female

Unstandardized Coefficients

B

14.444

-5.424E-02

.145

-.323

-2.22 1E-03

-.135

-5.622E-02

2.584E-02

-5.752E-02

.161

,264

.399

-1.487E-02

Std. Error

.002

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

,000

.ooo

.ooo

Standardize d

Coefficients

Beta

-.045

.084

-.200

-.001

-.099

-.026

.011

-.181

,082

.136

.I30

-.006

t

9,064.796

-3 62.625

747.964

-1,553.420

-12.147

-846.849

-227.808

90.725

-1,322.171

886.785

1,391.592

1,322.195

-61.519

Sig.

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

95% Confidence Interval for B

Lower Upper Bound Bound

14.440

-.055

.144

-.323

-.003

-.135

-.057

.025

- . O S

.160

.263

,399

-.015

14.448

-.054

.145

-.322

-.002

-. 134

-.056

,027

-.057

.161

.264

.400

-.014

162

Coefficients (a,b)

lode1

I H head i s unemployed

9E adjusted by modal HH 2ad + 2 ch)

3DWEL-1

3DWEL-2

D D WEL-3

3DWEL-4

DDWEL-5

DDWEL-7

DDWEL-8

DDWEL-9

DDWEL- 10

DDWAGE- 1

DDWAGE-2

DDWAGE-3

DD WAGE-5

DHEAT-2

DHEAT-3

DHE AT-4 How many rooms are there in your dwelling?

How many square meters i s the utilized area (m2)?

Do you have in your dwelling- Bathroom?

Do you have in your dwelling- Toilet (indoors)?

Do you have in your dwelling- Kitchen?

Do you have in your dwelling- Waste disposal?

Do you have in your dwelling- Central heating?

Do you have in your dwelling- Heating from ground?

Unstandardized Coefficients

B

-. 143

1.059E-02

.359

8.49 1E-02

-.176

8.633E-02

5.205E-02

.164

.140

-.190

-.35 1

1.053E-02

1.670E-02

7.986E-02

9.034E-02

.254

.260

.459

2.697E-02

1.737E-03

1.557E-02

,145

.7.218E-02

.14t

3.139E-02

Std. Error

.ooo

.ooo

.002

.ooo

.ooo ,001

.ooo

.001

.oo 1

.ooo

.oo 1

.ooo

.ooo

.ooo

.ooo

.001

.001

.001

.ooo

.ooo

.ooo

,000

.ooo

.oo 1

.001

.350 .001

Standardize d

Coefficients

Beta

-.073

-.027

.02 1

-.073

-.098

-.009

.014

.028

.011

-.049

-.063

.005

-.010

.068

.05 1

.lo8

.073

.039

.054

.lo7

-.010

.125

-.041

.010

-.04 1

.027

t

-757.275

- 1 78.748

233.354

-444.759

-753.416

-104.229

152.366

300.844

118.521

-499.557

-640.854

45.498

-91.800

643.960

497.510

244.697

242.991

3 99.724

360.789

7 17.584

-78.179

1,003.096

-348.0 14

109.885

-79.875

298.03 1

Sig.

.ooo

.ooo

.ooo ,000

.ooo

.ooo ,000

.ooo

.ooo

.ooo ,000

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

.ooo

,000

,000

.ooo

.ooo

.ooo

.ooo

.ooo

95% Confidence Interval for B

Lower Bound

-. 144

-.011

.355

-.085

-.176

-.088

.05 1

.163

.137

-.191

-.352

.010

-.017

.080

.090

,251

.258

.456

.027

.002

-.016

.147

-.073

.143

-.OS4

.347

Upper Bound

-.143

-.010

.362

-.084

-.175

-.084

.053

,165

.143

-. 189

-.349

,011

-.016

.080

.091

,256

.263

.462

.027

.002

-.015

.147

-.072

.149

-.079

.353

163

Coefficients (a,b)

lode1

Do you have in your dwelling- Piped water system?

Do you have in your dwelling- Electricity?

Do you have in your dwelling- Natural gas?

Do you have in your dwelling- Hot water?

Do you have in your dwelling- Satellite antenna?

Do you have in your dwelling- Closed garage?

Unstandardized Coefficients

B

j.122E-02

.326

.I25

,126

.126

.287

Std. Error

.ooo

.002

.ooo

.ooo

.ooo

,000

Standardize d

Coefficients

Beta

.035

,019

,039

.I13

.035

.09 1

a. Dependent Variable: LNF.

b. Weighted least squares regression-weighted by population weight.

t

312.081

207.743

306.671

936.297

346.933

977.939

Sig.

.ooo

.ooo

,000

,000

.ooo

.ooo

95% Confidence Interval for B

Lower Bound

.061

.322

.I24

.125

.125

.287

Upper Bound

.062

,330

.I26

.I26

.I27

.288

164

Appendix 5: Food Basket

165

Item Name

166

I ItemCode I Item Name ICalories in1 Price I Q2450 I C2450 I VAL2450 I

167

168

01 15201010 0115302010 0115303010 0116101020 0 1 16 1020 10

169

Margarine (packaged) 719 2,209,605 0.0099 71.1736 2 1,873 Sunflower oil 884 1,812,505 0.0393 347.1712 71,182 Maize oil 884 2,072,678 0.0058 51.2739 12,022 Orange 47 592,783 0.0496 23.2889 29,373 Grape (having seeds) 67 952,293 0.0062 4.1285 5,868

I ItemCode I Item Name /Calories in 100 grl Price I 43100 I C3100 [VAL31001

170

Appendix 6: Estimation of Average Household Adult Equivalent Size, Depending on the Formula and Parameters

Alpha Theta Average adult equivalent size o f household Average adjusted adult equivalent size o f household

The Average Household Adult Equivalent Size

0.8 0.8 0.8 0.8 0.8 0.6 0.7 0.8 0.9 1

2.22 2.55 2.94 3.39 3.92

4.11 4.16 4.22 4.28 4.36

Alpha 0.7 0.7 0.7 0.7 0.7 Theta 0.6 0.7 0.8 0.9 1 Average adult equivalent size o f household 2.18 2.50 2.87 3.31 3.81 Average adjusted adult equivalent size o f household 4.19 4.25 4.32 4.40 4.49

Alpha Theta Average adult equivalent size o f household Average adjusted adult equivalent size o f household

0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.8 0.9 1

2.14 2.45 2.81 3.22 3.70

4.27 4.34 4.43 4.52 4.63

171

Relationship between HH Size, Composition, and Adult Equivalent Size

HH Size

1

2

3

4

5

6

7

Adult

1

1

2

1

2

3

1

2

3

4

1

2

3

4

5

1

2

3

4

5

6

2

3

4

5

6

7

for P

Child

0

1

0

2

1

0

3

2

1

0

4

3

2

1

0

5

4

3

2

1

0

5

4

3

2

1

0

?ha = 0.9 and Theta = 0.6

Adult Equivalent

Size

1 .oo 1.47

1.52

1.85

1.89

1.93

2.19

2,23

2.26

2.30

2.50

2.53

2.56

2.59

2.63

2.78

2.81

2.84

2.87

2.90

2.93

3.07

3.10

3.13

3.16

3.19

3.21

Adult Equivalent Adjusted by Modal hh

(2ad + 2 ch)

1.80

2.64

2.72

3.33

3.40

3.47

3.94

4.00

4.06

4.13

4.49

4.54

4.60

4.66

4.72

4.99

5.05

5.10

5.16

5.21

5.26

5.52

5.57

5.62

5.67

5.72

5.77

Adult Equivalent Size OECD

1 .oo 1 s o 1.75

2.00

2.25

2.50

2.50

2.75

3.00

3.25

3.00

3.25

3.50

3.75

4.00

3.50

3.75

4.00

4.25

4.50

4.75

4.25

4.50

4.75

5.00

5.25

5.50

Adult Equivalent Size F A 0

.85

1.50

1.47

1.97

2.05

2.03

2.55

2.59

2.57

2.56

3.14

3.06

3.07

3.04

3.03

3.50

3.52

3.53

3.47

3.46

3.49

3.95

3.98

3.92

3.87

3.91

3.93

172

8

9

10

11

2

3

4

5

6

7

8

2

3

4

5

6

7

8

9

2

3

4

5

6

7

8

9

10

2

3

4

5

6

7

8

9

10

6

5

4

3

2

1

0

7

6

5

4

3

2

1

0

8

7

6

5

4

3

2

1

0

9

8

7

6

5

4

3

2

1

3.32

3.35

3.38

3.40

3.43

3.46

3.48

3.56

3.59

3.61

3.64

3.66

3.69

3.71

3.74

3.79

3.81

3.84

3.86

3.88

3.91

3.93

3.96

3.98

4.00

4.03

4.05

4.08

4.10

4.12

4.15

4.17

4.19

5.97

6.01

6.06

6.11

6.16

6.21

6.25

6.39

6.44

6.48

6.53

6.58

6.62

6.67

6.71

6.80

6.84

6.89

6.93

6.98

7.02

7.06

7.1 1

7.15

7.19

7.23

7.28

7.32

7.36

7.40

7.44

7.49

7.53

4.75

5.00

5.25

5.50

5.75

6.00

6.25

5.25

5.50

5.75

6.00

6.25

6.50

6.75

7.00

5.75

6.00

6.25

6.50

6.75

7.00

7.25

7.50

7.75

6.25

6.50

6.75

7.00

7.25

7.50

7.75

8.00

8.25

4.23

4.35

4.42

4.32

4.36

4.28

4.32

4.73

4.63

4.69

4.75

4.75

4.75

4.73

4.74

5.13

5.12

5.15

5.16

5.14

5.09

5.03

5.18

5.30

5.54

5.31

5.54

5.40

5.41

5.40

5.43

5.37

5.62

173

12

13

14

15

16

17

19

20

3

4

6

7

8

9

I O

6

7

8

9

10

7

8

9

I O

1 1

12

4

7

8

9

11

6

7

9

7

9

I O

14

8

9

10

9

12

13

14

9

8

6

5

4

3

2

7

6

5

4

3

7

6

5

4

3

2

11

8

7

6

4

I O

9

7

10

8

7

3

1 1

10

9

1 1

8

7

6

4.24

4.26

4.31

4.33

4.35

4.37

4.40

4.5 1

4.53

4.55

4.57

4.59

4.72

4.75

4.77

4.79

4.81

4.83

4.85

4.91

4.93

4.95

5.00

5.08

5.10

5. I 4

5.28

5.32

5.34

5.42

5.65

5.66

5.68

5.83

5.89

5.91

5.92

7.61

7.65

7.73

7.77

7.81

7.85

7.89

8.09

8.13

8.17

8.21

8.25

8.48

8.52

8.56

8.60

8.63

8.67

8.71

8.82

8.86

8.90

8.97

9.12

9.15

9.23

9.48

9.55

9.58

9.72

10.14

10.17

10.20

10.47

10.57

10.6 1

10.64

7.00

7.25

7.75

8.00

8.25

8.50

8.75

8.25

8.50

8.75

9.00

9.25

9.00

9.25

9.50

9.75

10.00

10.25

8.75

9.50

9.75

10.00

10.50

9.75

10.00

10.50

10.50

11.00

1 1.25

12.25

11.75

12.00

12.25

12.50

13.25

13.50

13.75

5.67

5.86

5.75

5.93

5.85

5.83

5.81

6.43

6.23

6.05

6.17

6.56

6.48

6.56

6.74

6.56

6.57

6.50

7.30

6.94

6.74

7.02

6.85

7.33

7.13

7.16

7.58

7.83

7.62

7.83

8.28

8.12

8.07

8.64

8.59

8.99

8.87

174

Appendix 7: General Descriptive Statistics

Gender

Turkey

Population Structure by Sex

Male

Female

Source: DIE, Turkey 2002 HBS.

Type of Settlement Turkey

Rural Urban

48.7% 48.5% 48.7%

51.3% 51.5% 5 1.3%

100.0% 100.0% 100.0%

Population Structure by Age

Age Group

0-5

6-14

15-19

20-24

25-29

30-34

35-39

4 w 4

45-49

50-54

55-59

60-64

65+

Turkey

Source: DIE, Turkey 2002 HBS.

Type of Settlement

Rural

8.9%

17.9%

10.9%

7.2%

6.6%

6.3%

7.0%

6.6%

5.8%

4.9%

3.8%

3.7%

10.5%

100.0%

Urban

10.8%

18.8%

10.5%

8.8%

8.1%

7.4%

7.7%

6.7%

5.9%

4.9%

3.1%

2.5%

4.8%

100.0%

rurkey

10.0%

18.4%

10.7%

8.2%

7.5%

7.0%

7.4%

6.7%

5.9%

4.9%

3.4%

2.9%

7.0%

100.0%

175

Population Structure b y Age and Sex

Gender

Age Group

0-5

6-14

15-19

20-24

25-29

30-34

35-39

4 w 4

45-49

50-54

55-59

60-64

65+

Turkey

Source DIE, Turkey 2002 HBS

M a l e

Y O

52.2%

50.1%

48.6%

42.0%

46.4%

47.4%

49.7%

49.6%

50.6%

50.7%

46,8%

49.0%

46.9%

48.7%

Female

YO

47.8%

49.9%

5 1.4%

58.0%

53.6%

52.6%

50.3%

50.4%

49.4%

49.3%

53.2%

51.0%

53.1%

5 1.3%

Turkey

YO

10.0%

18.4%

10.7%

8.2%

7.5%

7.0%

7.4%

6.7%

5.9%

4.9%

3.4%

2.9%

7.0%

100.0%

Y O

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

Educational Institutions Graduated F r o m

Population (age 6 and over) Structure by Education by the Type of Settlement

Illiterate

Literate without diploma

Primary school (5 years)

Primary education(8 years)

Junior high school (8=5+3)

Vocational school at Jr. high (8-9 = 5+ 3-4)

H igh school 11-12 = 8-9 + 3-4

Vocational school at high

Type of Settlement

Rura l

Count

3,798,846

5,491,283

10,666,730

1,295,683

1,2 14,386

59,108

1,526,118

464,725

Y O

15.3%

22.0%

42.8%

5.2%

4.9%

.2%

6.1%

1.9%

Urban

Count Y O

3,910,208 10.7%

7,721,572 2 1.1%

12,291,816 33.6%

1,920,310 5.2%

2,791,097 7.6%

115,567 .3%

4,193,597 11.5%

1,470,172 4.0%

Turk

Count

7,709,053

3,212,854

'2,958,546

3,215,992

4,005,484

174,674

5,7 19,7 15

1,934,897

1

Y O

12.5%

2 1.5%

37.3%

5.2%

6.5%

.3%

9.3%

3.1%

176

Population (age 6 and over) Structure by Education by the Type o f Settlement

2 year higher education (univ.)

4 year higher education (univ.)

Master and doctorate

rurkey

Yource: DIE, Turkey 2002 HBS.

Type of Settlement

Rural Urban

Count

183,938

200,058

8,012

14,908,885

YO

.7%

.8%

.O%

100.0%

Count Y O

676,758 1.8%

1,404,934

121,175

36,617,206

3.8%

.3%

100.0%

Turkey

Count

860,696

1,604,993

129,186

61,526,091

~

Population (age 14-65) Employment Status by Type of Settlement

Type of Settlement Turkey

Employed in some way

Unemployed

Economically inactive

Turkey

Source: Turkey 2002 HBS.

Rural Urban

Col Yo Col Yo Col Yo

57.7% 37.2% 45.5%

1.6% 3.4% 2.7%

40.8% 59.4% 51.8%

100.0% 100.0% 100.0%

Population (age 12+) Employment Status by Sex

Gender

Male Female

Col O/O Col Yo

Employed in some way

Unemployed

Economically inactive

rurkey

iource: DIE, Turkey 2002 HBS.

64.2% 28.4%

4.0% 1.4%

31.8% 70.2%

100.0% 100.0%

Turkey

Col Yo

45.5%

2.7%

5 1.8%

100.0%

O/O

1.4%

2.6%

.2%

100.0%

177

Population (age 12 +) Employment Status by Education

Lower than Primary

Col Yo

Employed in some way 27.5%

Unemployed .4%

Turkey 100.0%

Economically inactive 72.1%

Source: DIE, Turkey 2002 HBS.

Education

Primary

Col Yo

49.9%

2.3%

47.8%

100.0%

Secondary Vocational

Col Yo

49.3%

6.3%

44.4%

100.0%

Turkey

University

C O l % Col %

70.2% 45.5%

6.4% 2.7%

23.4% 51.8%

100.0% 100.0%

Population (age 14-65) Employment by Type of Settlement

Regular employee

Casual employee

Employment Status in Apprentice Workplace Employer

Self-employed

Unpaid family worker

Turkey

Source. Turkey 2002 HBS.

Type of Settlement

Rural Urban

Col Yo Col Yo

17.0% 60.5%

5.8% 9.2%

.2% .3%

2.0% 5.8%

36.5% 16.6%

38.6% 7.6%

100.0% 100.0%

Turkey

Col Yo

38.0%

7.4%

.2%

3.8%

26.9%

23.6%

100.0%

Population (age 12+) Emp

Regular employee

Casual employee

Employment Status in Apprentice Workplace Employer

Self-employed

Unpaid family worker

Turkey

Source: DIE, Turkey 2002 HBS.

iment by Sex

Gender Turkey

Male Female

Col Yo

45.8%

7.8%

.3%

5.5%

3 1.4%

9.2%

100.0%

Col Yo Col Yo

21.9% 38.0%

6.7% 7.4%

.1% .2%

.4% 3.8%

17.4% 26.9%

53.5% 23.6%

100.0% 100.0%

178

Population (age 12 +) Employment by Education

Education

Regular employee

Casual employee

Apprentice status in workplace Employer

Self-employed

Unpaid family worker

Turkey

Source: DIE, Turkey 2002 HBS.

Lower than Primary

Col Yo

6.8%

8.9%

.3%

.?yo

40.0%

43.3%

100.0%

Primary

Col Yo

32.2%

9.1%

.3%

3.8%

30.3%

24.2%

100.0%

Secondary Vocational

Col Yo

67.7%

2.6%

. l%

5 .o% 11.5%

13.0%

100.0%

Jniversity

Col Yo

81.8%

.6%

7.3%

6.5%

3.8%

100.0%

HH Head's Gender by the Type of Settlement

Type of Settlement Turkey

Rural Urban

Col Yo

Male

Female Gender

92.0%

8.0%

Turkey 100.0%

Source: DIE, Turkey 2002 HBS.

ROW Yo

39.5%

31.1%

38.6%

Col Yo ColYo ROW%

88.8% 60.5% 90.0%

11.2% 68.9% 10.0%

100.0% 61.4% 100.0%

&ow Yo

100.0%

100.0%

100.0%

rurkey

Col Yo

38.0%

7.4%

.2%

3.8%

26.9%

23.6%

100.0%

179

Educational Institutions Graduated From

Turkey

HH Head's Education by the Type of Settlement

Type of Settlement

Illiterate

Literate without diploma

Primary school (5 years)

Primary education (8 years)

Junior high school (8=5+3)

Vocational school at Jr. high

High school 11-12 = 8-9 + 3-4

Vocational school at high

2-year higher education (univ.)

4-year higher education (univ.)

Master and doctorate

(8-9 = 5+ 3-4)

Source: DIE, Turkey 2002 HBS.

Rural

Col Yo 10.5%

9.3%

6 1 .O%

. l %

7.4%

. l %

5.6%

3.3%

1 .O%

1.6%

. l%

100.0%

ROW Yo

49.7%

53.2%

44.3%

48.0%

30.9%

13.7%

22.9%

26.6%

18.3%

11.7%

6.0%

38.6%

Urban

Col %

6.7%

5.2%

48.2%

. l %

10.3%

.5%

1 1.8%

5.8%

2.8%

7.7%

.9%

100.0%

ROW Yo 50.3%

46.8%

55.7%

52.0%

69.1%

86.3%

77.1%

73.4%

81.7%

88.3%

94.0%

61.4%

Turkey

Col Yo

8.2%

6.8%

53.1%

. l %

9.2%

.4%

9.4%

4.8%

2.1%

5.4%

.6%

100.0%

ROW Yo

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

Dwelling Type by the Type of Settlement

Luxurious house

Separated

Semi detached house

Basement

Ground floor

Regular floor

Attic

Double floor

Shanty

Other (Indicate)

What i s the type o f your dwelling?

Turkey

Source. Turkey 2002 HBS.

Type of Settlement

Rural

Y O

.2%

74.1%

12.2%

.O%

1.9%

9.0%

.6%

. l %

1 .O%

3 %

100.0%

Urban

Y O

. l %

22.9%

12.2%

1.4%

6.1%

51.3%

1.5%

.6%

3.7%

.l%

100.0%

Turkey

YO

.2%

42.7%

12.2%

3 %

4.5%

35.0%

1.1%

.4%

2.7%

.4%

100.0%

180

Housing Rent

Mean

Median Actual Rents

Type o f Settlement

Rura l U rban

60,287,195 100,553,2 13

50,000,000 80,000,000

Turkey

94,554,897

75,000,000

Source: Turkey 2002 HBS.

H o w many rooms are there in your dwelling?

Number o f Rooms (frequency distr ibution )

Type o f Settlement

Rura l U rban

1

2

eo1 Yo Col Yo

.92 .7 1

11.80 9.86

38.90 43.48

35.84 40.79

8.26 4.19

2.63 .58

7 1.07 .16

8 .so .18

9 .04

10 .07 .01

Turkey 100.00 100.00

Source Turkey 2002 HBS.

Turkey

eo1 Yo

.79

10.61

41.71

38.88

5.76

1.37

.5 1

.30

.03

.03

100.00

I

Number o f Rooms

Type o f Settlement

R u r a l U rban Turkey

Mean 3.5 3.4 3.5 H o w many rooms are there in your dwelling?

Median 3.0 3.0 3.0

Source Turkey 2002 HBS.

181

PersonlRoom Ratio Statistics

Type of Settlement

Rural Urban Turkey

1.301 1.277 1.286 Ratio number of members/ number of rooms

Source: Turkey 2002 HBS.

Amenities

Type of Settlement

Do you have in your dwelling: Bathroom?

Do you have in your dwelling: Toilet (indoors)?

Do you have in your dwelling: Kitchen?

Do you have in your dwelling: Waste disposal?

Do you have in your dwelling: Central heating?

Do you have in your dwelling: Heating from ground?

Do you have in your dwelling: Piped water system?

Do you have in your dwelling: Electricity?

Do you have in your dwelling: Natural gas?

Do you have in your dwelling: Hot water?

Do you have in your dwelling: Satellite antenna?

Do you have in your dwelling: Closed garage?

Source: Turkey 2002 HBS.

Rural

.836

.62 1

.883

.001

.OS4

.ooo 3 8 8

.999

,002

SO9

.002

.033

Urban

.966

.943

.980

.004

.235

.006

.994

.999

.149

.781

.093

,036

hrkey

.916

.819

.942

.003

.165

.004

,953

.999

.092

.676

.058

,035

182

Durable Goods: Average Number Per One Household

H o w many telephones do you have?

How many cellular phones do you have?

H o w many computers do you have?

H o w many emets do you have?

H o w many televisions do you have?

H o w many videos do you have?

H o w many DVDs or VCRs do you have?

H o w many video cameras do you have?

H o w many satellite antennas do you have?

H o w many HI-FI systems do you have?

H o w many CD players do you have?

H o w many refrigerators do you have?

H o w many deep freezers do you have?

H o w many dishwashers do you have?

How many gas stoves with oven do you have?

H o w many electric ovens do you have?

H o w many microwave ovens do you have?

H o w many automatic washing machines do you have?

H o w many dryers do you have?

How many presses (irons) do you have?

How many vacuum cleaners do you have?

H o w many carpet washing machines do you have?

How many air-conditioners do you have?

How many water heaters do you have?

How many Jacuzzis do you have?

How many aspirators do you have?

Source: Turkey 2002 HBS.

rype of Settlement

Rural

,869

,446

.027

.008

1.009

,044

.066

.009

.296

,232

.033

.954

.062

.073

.480

.379

.017

.595

.006

.005

.592

.05 1

.008

.391

.003

.143

Urban

,900

,781

. lo9

.043

1.207

.096

.151

,025

.160

,434

.092

.98 1

.06 1

.281

.629

.437

.053

,842

,011

,026

,815

.161

,044

.625

.005

.3 18

rurkey

.888

.652

.077

.030

1.130

.076

.118

.019

.212

.356

.070

.97 1

.061

.201

,572

.415

.039

.746

.009

,018

.729

.119

.030

.535

.004

.250

183

Vehicles : Average Number Per One Household

Number o f automobiles-owned

Number o f automobile-provided b y employer

Number o f Jeeps

Number o f minibus-caravans

Number o f motorcycles

Number o f motorized-motorized sea vehicle

Number o f Yachts

Source: Turkey 2002 HBS.

rype of Settlement

R u r a l

.182

.004

.ooo

.016

.05 1

.001

.ooo

U r b a n

.275

.015

.001

.013

.038

.ooo

.ooo

Turkey

.239

,011

.001

,014

.043

.oo 1

.ooo

184

ANNEX 11: POVERTY IN TURKEY: A LITERATURE REVIEW

This literature review summarizes the methodology and results o f studies that focus on poverty in Turkey. Most o f these studies use 1987 and 1994 Household Budget Survey (HBS) data. One o f them i s a sociological study that examines poverty in Turkey o n the basis o f qualitative data that come f rom 160 interviews conducted with the poor.

There are various methods that can be applied to assess poverty, and the resulting poverty measures are extremely sensitive to the type o f method used. Therefore, a br ie f review o f the methodology used should be an essential part o f any poverty assessment report. In this review, i t i s found that one problem with some Turkish poverty studies i s that they fa i l t o give sufficient information about their methodology, and that there i s a lack o f a unified framework. This makes comparison o f results across studies difficult. Therefore, in this review, there i s some emphasis o n the comparison o f the methodology and poverty measures used in the studies. In general, if there i s information o n the method used in the study, this i s reviewed in detail herein.

Studies Based on 1994 HBS

Al i c i (2000) assesses poverty and examines its determinants using the 1994 Household Budget Survey (HBS) conducted by DIE.

An absolute poverty l ine based on a minimum required level o f calories, and a relative poverty line, are used in this study to measure poverty. In the construction o f the absolute poverty line, actual consumption habits are taken into account. The approach to setting the poverty lines in this study distinguishes i t f rom other related studies. The minimum required level o f calories i s set by f i rs t taking the actual consumption o f households in the bottom quintile of total consumption expenditures and subsequently computing the total calorie content o f the food items consumed for each household in this group. The total calories for each household are then transformed into per equivalent adult units. The average calorie intake per equivalent adult in this reference group i s taken as the minimum required level o f calories. The resulting minimum required level o f calories i s not reported in the study. In total, 164 different minimum food baskets-that differ in their composition but not in their total calorie content- are obtained for the rural areas and 200 for the urban areas. Households with consumption expenditures per equivalent adult lower than the imputed cost o f the minimum food basket are considered extremely poor (Food Poverty). The Complete Poverty L ine (CPL)--which takes into account consumption o f non- food goods and services-is constructed using the share o f non-food consumption among individuals whose total consumption i s just above the value o f the food poverty line. I t i s found that the cost o f the basket that also includes the non-food components i s 1.78 times the cost o f the minimum food basket in urban areas, and 1.5 times in rural areas. Households with consumption expenditures per equivalent adult lower than the CPL are considered poor (Cost o f Basic Needs Approach). The relative l ine i s set at one- ha l f o f the monthly median income per equivalent adult. According to this approach, households with monthly income less than the corresponding relative l ine are considered poor.

In this study, household sizes are adjusted using an appropriate economies-of-scale parameter for a l l the calculations. The results for different values o f this parameter are reported separately. Table A.II.l presents results using different poverty measures and different economies-of-scale parameters.

185

Table A.II.l. Different Poverty Measures and Results

OECD measure** (Relative Poverty)

I Yo Consumption-Based I

High economies o f scale 8 = 0.5

15.69

Measures

Poverty) e = 0.75

(Food + Non-Food) e = 0.75 Basic Needs, CPL

Regions

Marmara Aegean Mediterranean Central Rlack Sea

~ I33 economies o f scale 8 = 0.90 ~ OECD scale

Income-Based Measures

Share of Basic Extreme Total Needs poverty

("A) Poverty) Population (CPL) (YO) (Food

( Y O )

24.7 3.86 0.36 13.6 1.88 0.14 12.8 3.78 0.30 17.2 6.38 1.14 13 5 2 74 O 16

1 Basic Needs*

Southeast

I Medium economies o f scale 1 5.09 1 e = 0.75

9.6 I 11.05 1 1.36 TOTAL

** Comparison o f income for equivalent adult with one-half of the monthly median income. Note: Based on 1994 HBS. Source: Alici (2000).

100.00 1 5.20 I 0.69

The main focus o f the study i s the poverty profi le in Turkey. Table A.II.2 presents the poverty rates by region in Turkey. East Anatolia i s the region facing highest poverty r i s k (1 1.25 percent).

Table A.II.3 presents the poverty rates in urban and rural areas. Urban and rural areas do not differ significantly in terms o f poverty risk. This result i s different f rom the general findings in other studies that conclude that rural poverty rates are higher than urban poverty rates.

186

Table A.II.3. Urban and Rural Poverty Rates

Regions

Rural Urban

Share of Basic Extreme Total Needs Poverty

(”/) (”/.I Poverty) ( Y O )

46.46 5.21 0.80 53.54 5.20 0.59

Population (CPL) (Food

While Al ic i (2000) i s a study that mainly focuses on poverty across various dimensions in Turkey in general, Erdogan (2000) is a study that puts more emphasis on the structure o f poverty in Turkey. The Erdogan (2000) study consists o f an introduction to poverty and alternative choices o f setting poverty lines, reviews o f relevant poverty literature in Turkey, and poverty results based on the 1994 HBS. The main feature o f the study i s i t s emphasis on the detailed examination o f the structure o f poverty in Turkey.

Erdogan’s (2000) choice o f poverty measures i s similar to Al ic i (2000). A Food Poverty Line based on a minimum required level o f calories, and the Complete Poverty Line based on consumption o f both food and non-food goods and services, are constructed. The results are reported for both o f the measures used. The important distinction between the poverty measures used by Al ia (2000) and Erdogan (2000) i s the difference in the methods they use in setting the minimum required level o f calories. A l i c i (2000) sets the minimum requirement o f calories using the actual survey data,39 whereas Erdogan calculates the calorie requirements for a four-person family according to Table A.II.4.

Table A.II.4. Calorie Requirements by Age and Gender

Source: Erdogan (2000).

In the Erdogan (2000) study, the Food Poverty Line is set as the estimated local cost o f the minimum food basket that meets the food energy requirements, and households with monthly monetary incomes below the cost o f the minimum food basket are considered poor. As the Complete Poverty Line (Cost o f Basic Needs Approach), cost o f a consumption bundle deemed to be adequate for basic needs (which include food and non-food components) i s estimated, and households with monthly monetary incomes below the cost o f this bundle are considered poor. The second approach takes into account housing, clothing, transportation, and furniture expenditures, as well as food expenditures. Erdogan takes into account the differences in needs in both approaches, according to location o f residence and household size.

39 For more details on Alici’s (2000) method, see previous explanation.

187

According to the f irst method, 8.37 percent o f the individuals and 5.66 percent o f the households are poor. In general, the higher poverty rates o f individuals relative to households can be explained by the fact that households with more members face more poverty compared to households with fewer members. In the rural areas, 11.82 percent o f individuals are poor, and in the urban areas 4.60 percent are poor. There i s a significant difference between urban and rural areas in terms o f poverty rates, and this difference holds after disaggregating according to certain demographic and socioeconomic characteristics. The highest percentage o f poor i s in Southeast Anatolia rural areas. Also, household size i s a significant determinant factor in poverty. As the household size gets bigger, poverty risk increases. In Turkey, 32.19 percent o f the households with 13 members are poor, while 27.32 percent o f households with 14 members, and 24.89 percent for households with 15 or more members, are poor. According to the second method, 24.30 percent o f individuals and 19.3 1 percent o f households are poor. Although the cost o f basic needs in rural areas i s lower than in urban areas, the poverty rates in the rural areas tend to be higher. The highest percentage o f poor i s again in the Southeast Anatolia rural areas.

65+

The Erdogan (2000) study places strong emphasis on the structure o f poverty. Dimensions and characteristics o f poverty are examined in detail. Distribution o f age, gender, education, marital status, employment status, and economic activities among the poor in Turkey are important to understand who i s poor in the country, and this study thoroughly analyzes this issue. According to the first method, among the poor in Turkey, 5 1.49 percent are women and 48.5 1 percent are men. Some 72.67 percent o f the poor reside in rural places. Individuals aged 15 to 64 and 0 to 14 are characterized by high poverty rates compared to individuals age 65+. According to the second method, 52.78 percent o f those aged 15 to 64 are poor, 42.26 percent o f those aged 0 to 14 are poor, and 4.96 percent o f those 65+ are poor. Tables A.II.5 and A.II.6 present Erdogan’s findings regarding the structure o f poverty by age and gender.

2.96 I 2.94 I 2.98

Table A.II.5. Structure o f Poverty by Age and Gender (Food Poverty)

188

Table A.II.6. Structure of Poverty by Age and Gender (Basic Needs)

Sick Retired Elderly Other

Working

Note: Based on 1994 HBS. Source: Erdogan (2000).

2.05 2.70 1.10 1.08 0.55 1.86 9.54 12.09 5.83 0.43 0.57 0.22

53.67 62.49 29.69

In Turkey, the population aged 12 and above constitutes 76 percent o f the total population. Tables A.II.7 and A.II.8 present the poverty o f this group by employment status. Analysis o f the distribution o f the poor according to employment status reveals that according to the first method, among the poor in Turkey, 53.67 percent are employed and 46.33 are unemployed (or out o f the labor force). According to the second method, among the poor, 46.71 percent are employed and 53.29 percent are unemployed. There i s greater disparity in the distribution o f employment status among the poor when rural and urban areas are examined separately. In the urban areas, 34.02 percent o f the poor are employed, and in the rural areas 64.66 percent o f the poor are employed. Within the group o f individuals who are not working, housewives, students, and the elderly face higher poverty r i s k relative to other groups.

Table A.II.7. Structure o f Poverty by Employment Status (Food Poverty)

Casual worker 16.56 11.50 45.52

24.67 25.57 19.50 Family worker w l 49.86 57.50 6.15

Source; Erdogan (2000).

189

Table A.II.8. Structure of Poverty by Employment Status (Basic Needs)

Employment Status

Total Out o f work Unemployed Student Hoii sew i fe

YO Among YO Among YO Among Poor Rural Poor Urban Poor

100.00 62.89 37.11 46.71 35.34 65.98 14.95 17.11 13.00 22.56 19.49 25.33 46 99 42 69 50.89

Handicapped Sick Retired

I nopay Source: Erdogan (2000).

1.36 1.48 1.07 2.18 3.24 1.23 2.93 2.62 3.21

Within the group o f poor individuals who are economically active, a majority (73.2 percent) i s in the agnculture and forestry sector, according to the f irst method. According to the second method, 65.60 percent o f the poor are in the agriculture and forestry sectors, 8.67 percent are in the manufacturing sector, and 8.32 percent are in construction. In rural areas, the poor are mainly in the agriculture and forestry sectors. Tables A.II.9 and AX. 10 summarize the distribution according to economic activities among the poor.

Table A.II.9. Structure o f Poverty by Economic Activity (Food Poverty)

--- =Negligible. Source: Erdogan (2000).

190

Table A.II.lO. Structure o f Poverty by Economic Activity (Basic Needs)

trade

Financial institutions Transportation 3.03 1.62 7.57

0.4 1 0.18 1.16

Regions

Source: Erdogan (2000).

Head Count Poverty Severity of Index Gap Index Poverty

Despite the recent shift of poverty f rom rural to urban areas, rural poverty remains an important dimension o f poverty in Turkey. However, there are not many studies that focus on the determinants of rural poverty. Pamuk (2000) attempts to address this issue in her study. She uses rural area data o f the 1994 Household Income Distribution Survey. There are three poverty measures used in this study: the Headcount Index, the Poverty Gap Index (PGI), and the Foster-Greer-Thorbecke P2 Index. The second measure, the PGI, i s the arithmetic mean o f the difference between the income o f individuals in poor households and the poverty line; the third measure, P2, i s the arithmetic mean o f the square o f this difference, and it captures the severity o f poverty.

Pamuk shows that rural poverty differs significantly across regions. Table AX. 1 1 summarizes the measurements o f poverty and the structure o f poverty across regions. One important point to keep in mind for a l l the tables in Pamuk’s study i s that the rural population i s the group being examined. Therefore, a l l the numbers are indexes that compare certain subgroups within the rural population only, not the total population in Turkey.

Table A.II . l l . Regional Poverty

Marmara Aegean Mediterranean Central Anatolia Black Sea East Southeast

6.50 7.67

17.42 15.79 16.44 12.97 30.46

2 1.76 23.36 27.77 26.73 29.44 26.17 26.93

26.92

0.53 0.68 1.94 1.84 2.05 1.27 3.26

1.62

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Pamuk also looks at how the poverty risk faced by the members o f a household changes according to the socioeconomic status o f the household head. Table A.II.12 summarizes Pamuk’s findings for poverty by gender o f the household head. In general, households with female heads face higher poverty risk, and the severity o f poverty i s higher for such households.

Type of Agricultural Activity of the Household

Table A.II.12. Poverty and Gender of Household Head

Total Poor Head Count Index Population (Yo) (YO) ( Y O )

Gender of 1 Household Head

Total

IMale Female

14.80 100.00 100.00

Total Source: Pamuk (2000).

Head Poverty Severity of Count Gap Poverty Index Index

14.46 26.91 1.58 22.11 27.15 2.41

14.80 26.92 1.62

In the rural areas, just l ike in urban areas, household size and years o f education o f the household head are determinant factors o f poverty. As household size increases, the poverty r isk faced by the household members increases, and as years o f education o f the household head increases, the poverty r i s k decreases. Some other socioeconomic variables she uses to disaggregate poverty are by employment status o f household head, number o f working individuals in the household, source o f income, and types o f economic activities the household head i s engaged in (the study also looks at some o f these statistics at the individual level). The findings are similar to the statistics obtained from the total population.

An important aspect o f the study i s that poverty i s examined according to certain factors that play an important role in determining the relative standing o f households in rural places. Its analysis o f poverty profiles that are geared solely toward the analysis o f the rural areas i s what gives this study i t s unique place in the poverty literature in Turkey. For example, Pamuk looks at poverty according to the agricultural activity the household i s engaged in, and ownership o f agricultural land and equipment. Table A.II.13 summarizes Pamuk’s findings on poverty rates according to the type o f agricultural activity rural households engage in. In rural areas, households not engaged in agricultural activities face above- average poverty risk.

Table A.II.13. Poverty and Agricultural Activity of the Household

Do not engage in agricultural activity Farmer Stockbreeder Both farmer and stockbreeder

17.07 29.42 33.94

15.88 15.03 16.12 15.79 4.99 5.32 13.07 50.56 44.62 I

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Table A.II.14 summarizes poverty rates according to the size and ownership o f agricultural land in rural areas. I t i s observed that the highest level o f poverty risk i s faced by households with agricultural land o f 6 to 10 decares (1 decare = 0.247 acres). As the size o f the agncultural land that i s owned increases, poverty risk decreases. One general conclusion i s that in rural areas, households that do not engage in agricultural activities, and those that engage in agricultural activities with land o f less than 20 decares, face higher poverty risk.

Table A.II.14. Poverty and Agricultural Land Size

Head Count Total Poor Agricultural Land Size Index Population Population (decares) ("/.I

( Y O ) ( Y O )

Do not have land Ck5 6-10 11-20 21-50 51-100 101-500 501 +

16.72 17.88 21.36 16.80 13.80 5.64 2.54 0.00

36.26 7.77 8.97

13.24 18.27 9.71 5.60 0.18

40.95 9.38

12.95 15.03 17.04 3.70 0.96 0.00

Total 14.80 100.00 100.00 Note: Based on 1994 HBS. *1 decare = 0.247 acres. Source: Pamuk (2000).

Table A.II.15 shows the poverty rates according to the size o f agricultural land owned. One striking observation i s that the poverty rate in Southeast Anatolia i s 30.46 percent, whi le the poverty rate in the group o f individuals living in households with agncultural land o f 0 to 5 decares i s 48.23 percent, in this region. The regional breakdown of the poverty rates reveals that those households engaging in agricultural activity but that o w n relatively smaller amounts o f land face higher poverty r i s k than households not engaging in agricultural activity in most of the regions, except for Central Anatolia. This observation contradicts the results f rom the previous table, that is, that households engaging in agricultural activity face lower poverty risk relative to those that do not (Table A.II.14). This i s a result o f the fact that lower poverty risk of those households engaging in agricultural activity i s mainly driven by those who o w n more land.

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Table A.II.15. Poverty and Agricultural Land Size Across Regions

Agricultural Land Size

Marmara Aegean Mediterr- Central Black Sea East South- Total anean Anatolia east

O* 0** 0-5 6-10 11-20 2 1-50 51-100 1 0 1-500 501 +

Total

8.23 5.36 8.20

15.37 4.67 4.33 0.52 0.00 0.00

6.50 7.67 17.42 15.79 16.44 12.97 30.46 14.80

9.47 13.84 4.61

2 1.84 8.97 1.75 0.00 0.00 0.00

Number of Tractors

20.39 18.20 19.88 23.22 18.05 12.93 3.56 0.00 0.00

Marmara Aegean Mediterr- Central Black Sea East South- Total anean Anatolia east

17.04 15.06 27.18 1 1.47 19.56 23.74

6.22 3.44 0.00

Total

10.71 22.68 21.84 22.24 19.67 17.57 0.00 0.00 0.00

7.05 9.42 16.02 16.45 15.73 12.59 29.19 14.15

18.90 39.45 17.07 15.36 20.27 15.79 19.52 48.23 18.60 22.50 42.65 22.40 20.37 34.86 17.36

5.40 22.35 12.05 3.16 15.79 4.17 0.00 5.79 2.09 0.00 0.00 0.00

** Households that engage only in stockbreedkg as an agricultural activity. *** 1 decare = 0.247 acres.

Another important factor in rural places i s the ownership o f tractors. Table A.II.16 depicts the high poverty risk faced by households that do not own a tractor. An analysis o f the structure o f poverty by tractor ownership (Table A.II.17) reveals that while the proportion o f rural households without a tractor i s 84.42 percent, their proportion within the poor population i s 92.32 percent.

Table A.II.16. Poverty and Number of Tractors Owned

Do not own one

1 2 3

8.73 10.94 16.97 17.48 16.86 13.12 30.74 15.47

0.88 1.26 9.04 12.68 8.35 8.71 15.76 7.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

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Table A.II.17. Structure of Poverty According to Number o f Tractors Owned

Number of Tractors

Marmara Aegean Mediter Central Black Sea East South- Total r-anean Anatolia east

Do not own one

1 2 3

Total I 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 ource: Pamuk (2000).

97.36 97.94 93.25 84.59 92.98 91.67 94.39 92.32

2.64 2.06 6.75 15.41 7.02 8.33 5.61 7.68 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Studies Based on 1987 HBS

Years 1987 1988 1989 1990 1991 1992

Dumanli (1996) looks at dimensions o f poverty in Turkey using the 1987 Household Income and Expenditures Survey (HBS). The poverty lines are computed based on a minimum required level o f calories taken as 2,450 calories per day. The cost o f a minimum food basket that meets the daily calorie- intake requirement i s taken as the food poverty line. Table A.II.18 presents the poverty l ines used in this study.

TL US$ 284,700 332.2 473,405 332.2 777,085 365.0

1,388,433 532.4 2,135,740 513.4 3.830.809 556.2

Table A.II.18. Poverty Line Per Capita (Annual)

L

5% 1,176 1,127 5 yo 1,264 1,298 5 yo 5 yo 5 yo

, , , 1993 I 14,696,360 1 541.4

TL = Turkish Lira. Source: Dumanlr (1996).

1,293 1,483 1,361 1,591 1,361 1,677

Table A.II.19 summarizes Dumanli's findings on poverty. Here, he takes an approach o f comparing average household income to the poverty line across households grouped according to annual income. In his study, Dumanli puts a stronger emphasis on income inequality than poverty.

Table A.II.19. Comparison of Income and Poverty Lines by 5 Percent of Population

Income

5% 1.156 915

195

I Household I Poverty Line I Household 1 Percentage I Income

5%

I 5 ?'o I 1.463 I 2.960 I

1.330 1.863 5% 5% 5%

1,347 2,249 1,361 2,454 1.341 2.692

5% 5%

*Values in 1,000 TL. Source: Dumanli (1996).

- 7 - - - 3 - - -

1,426 3,259 1,415 3,623

Comparative Studies

5%

Due to the diff iculty o f comparing poverty across time, there are no t many comparative studies that examine how poverty has changed over the years in Turkey. Dagdemir (1999) is unique in this respect, and analyzes data f rom the 1987 and 1994 Household Income and Consumption Expenditures Surveys (HBS) to assess changes in poverty during 1987-1994.

1,449 4,063

For the 1994 poverty lines, Dagdemir uses the poverty lines that Erdogan (2000) calculates using the minimum food cost (MFC) and cost-of-basic needs (CBN) methods. The 1987 poverty lines are obtained after deflating the 1994 poverty lines with an appropriate index that takes into account increase in per capita income between 1987 and 1994. The issue o f comparability o f poverty between these two years i s not addressed in detail in this study. I t i s expected that results are very sensitive to the price indexes that are used, and a more detailed analysis o f the comparability o f poverty lines between the two periods i s essential for a comparative analysis o f poverty. The changes in poverty in Turkey during this period are summarized in Tables A.II.20 and A.II.2 1.

5%

Table A.II.20. Poverty in Turkey, 1987-1 994 (Minimum-Food-Cost Approach

1,469 4,627

Poverty (YO)

Marmara

Mediterranean 127 13.3 13.6

5% 5% 5 yo 5 yo

I Central I 85 I 108 I 10.1 I 10.1 I

1,572 5,332 1,495 6,377 1,515 8,102 1,461 16,947

Black Sea 109 East 141 Southeast 129

143 14.2 18.8 144 --- 14.7 131 --_ 19.6

196

Urban Rural Turkey

95 136 6.9 8.7 126 135 21.2 20.2 105 138 11.5 11.5

Table A.II.21. Poverty in Turkey, 1987-1994, (Cost-of-Basic-Needs Approach)

Regions

Marmara Aegean Mediterranean

Poverty Line Poverty (%)

1987 1994 1987 1994 165 220 --- 23.4 168 208 --- 20.8 177 254 41 5 46 7

(US$)

Central I 134 I 170 I 23.2 I 27.2 Black Sea I 148 I 194 I 23.0 32.2

Dagdemir finds that the cost o f a minimum food basket increased from US$l05 to US$138 (monthly) between 1987 and 1994. For the C B N approach, the minimum cost o f meeting basic food and non-food requirements increased from U S 1 5 2 to US$198. I t i s observed that the household income o f the poor has followed an increasing trend parallel to the increase in the minimum food cost, and therefore the percentage o f households that cannot meet the minimum food cost has not changed significantly during this period. On the other hand, the percentage o f households whose income i s below the C B N poverty l ine has increased from 27 to 29 percent.

According to the MFC method, the poverty rate in urban areas increased from 6.9 to 8.7 percent between 1987 and 1994. In contrast, in rural areas the poverty rate decreased from 21.2 to 20.7 percent. According to the C B N method, the poverty rate in urban areas increased from 14.3 to 20 percent, and in rural areas it increased from 41.5 to 42.5 percent. One conclusion from these observations i s that there i s a sharp contrast in the change in poverty rates in rural areas compared to change in poverty rates in urban areas according to the C B N method. On the other hand, according to the M F C method, in both urban and rural areas, the change in poverty rates during this period i s not as significant. According to the C B N method, i t i s observed that the poverty rates in urban areas have increased significantly during this period. A closer look into the structure o f poverty reveals the share o f the urban poor in the total population o f poor has increased from 27.5 to 37.6 percent, while the share o f the rural poor has decreased from 72.5 to 63.4 percent. Based on these observations, i t can be concluded that poverty slowly shifted from urban to rural areas between 1987 and 1994. However, rural poverty st i l l remains significantly higher than urban poverty in Turkey.

Dagdemir also analyzes the changes in regional poverty during 1987-1994. In Southeast Anatolia, the poverty l ine increased from US$135 monthly to US$137, and the poverty rate decreased from 21.9 to 16.5 percent. In 1994, the region with the highest poverty rate was the Black Sea, followed by East and Southeast, Mediterranean, Central Anatolia, Aegean, and Marmara regions. In general, i t i s observed that poverty rates have increased most significantly in the Aegean, Marmara, and Black Sea regions.

Perceptions of Urban Poverty

Perceptions of Urban Poverty in Turkey (Erdogan 2002) i s a sociological study on poverty. I t s focus i s the urban poor, and it i s based on 160 interviews conducted with extremely poor households. The study consists o f articles by various authors, and a selection o f the 160 interviews. I ts main purpose i s to

197

identify h o w the social hierarchy reflects in the self-image o f the poor, and the “deep scars,” other than hunger and physical hardships, that poverty inflicts upon them. Such identification i s achieved through using the interviews with the poor as the main source. The following are some o f the issues o n which the authors focus: H o w the poor feel about their place in society; what their daily experiences are and h o w they choose to express and define themselves; the conditions that the poor l ive in; h o w the poor perceive class and cultural hierarchy in the society; how this affects the way the poor perceive themselves and the “others” (the “rich”); the process o f the marginalization and isolation o f the poor; and differences in the way men and women experience poverty.

The study seeks to go beyond listing the effects o f “material poverty.” The main concern i s the other dimension o f poverty that i s more subjective, personal, and not quantifiable. Us ing the interviews, it i s shown that the experience o f poverty takes various forms. One form i s the “visual experience” o f the poor. The social hierarchy are reflected in the way the poor feel they are being “looked” at by the “others” (the rich). The poor feel that the r i c h look at them f rom above and that they humiliate the poor even with their looks. Therefore, “looks” constitute the first feature o f the individual’s experience o f h is or her poverty. Another feature o f the experience of poverty i s the conflict between “wanting to speak up” whi le “never speaking up.” In other words, while the poor have the desire to speak up about their painful experiences, they are also reluctant to speak at all, especially because they do not see themselves in a position to speak. Erdogan emphasizes the fact that the poor are ashamed o f their way o f speaking. Therefore, listening to the poor should consist not only o f listening to their words-it should also be listening to their silence and interpreting it correctly. Another feature of the self-image o f the poor i s the reflection of the poverty experience in the “physical body.” One example i s the general be l ie f o f the poor that the r i ch see them as “animals.” In the interviews, i t i s observed that this self-image i s also reflected in their body posture. For example, the respondents usually refuse to s i t at the same level as the interviewer; they want to s i t o n the floor or o n a lower chair, instead.

It i s observed in the interviews that the extent o f informal assistance that i s in general believed to exist among relatives, fiiends, neighbors, and hemseri i s rarely mentioned by the poor as a source of help. Most o f the interviewees say that they never get support f i o m friends, relatives, neighbors, or hemseri. For the poor households interviewed, the major source o f help comes from various government and private organizations (the Social Services and Chi ld Protection Organization [Sosyal Hizmetler ve Cocuk Esirgeme Kurumu, SHCEK], Deniz Feneri, municipalities, and so forth). Although some mention a couple o f instances where their relatives or neighbors helped them find a j o b or gave them food and money, the general consensus i s that such sources o f a id are rare and unreliable. I t i s concluded that the social assistance provided by such sources in general excludes the “extremely poor.” For example, when asked whether they help each other among relatives and neighbors, most o f the respondents say, “Nobody i s in the [financial] position to help anybody.” It i s concluded that support f rom govemment or private organizations i s a major source o f help for the extremely poor. The woman’s role in seeking such support i s very important for the coping strategies of the poor households. In most interviews, the women say that their husband i s too proud to ask for help. Therefore, i t i s usually the woman who tries these altema t ive s .

The interviews provide a different perspective o n the lives o f the extremely poor households. The picture o f poverty that i s revealed here i s very different f rom the one usually observed in the popular media. Poverty i s not romanticized. Moreover, the common tendencies o f the popular media, such as attaching a different identity to the poor or looking for the characteristics o f the “culture o f poverty,” are severely criticized in this study. Cultural schemas in relation to poverty are studied in a framework that i s not restrictive in i t s implications. This study i s unique in the way it sheds light on these cultural schemas by measuring or quantifying the perceptions of the poor o f their daily l i fe.

198

Conclusion

The only way to combat poverty i s to eliminate the factors that create it. This can be done only if policymakers know what those factors are. The studies reviewed here aim to provide such information by examining various dimensions o f poverty. It i s important to bring this information together and compare the studies in terms o f the different aspects o f poverty they look at, and this review i s an attempt to achieve that goal. I t should be noted that there are some poverty studies that have not been reviewed here mainly due to lack o f access.

199

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To Leninakan

ToAkhaltsikheTo Batumi

and T’bilisi

ToMalko

TurnovoTo Kapitan Andreevo

and Kharmanli

ToKipoi

To Reza’iyeh

GEORGIA

ARMENIA

ISLAMICREP. OFIRAN

I R A Q

SYRIAN ARAB REPUBLIC

B U L G A R I A

GREECE

44°28°

40°40°

32° 36°

36° 36°

44°40°32°28°

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 100 200

KILOMETERS

TURKEY

JOINT POVERTY ASSESSMENT REPORT (JPAR)

PROVINCE CAPITALS*

NATIONAL CAPITAL

MAIN ROADS

RAILROADS

PROVINCE BOUNDARIES

INTERNATIONAL BOUNDARIES

*Province names are the same as their capitals.

IBRD 33581

SEPTEMBER 2004

TURKEY

HakkariSirnak

Siirt

VanBitlis

Mus

Agri

Igdir

Kars

ArdahanArtvin

Rize

Bayburt

Erzurum

Trabzon

Gümüshane

Giresun

Erzincan

TunceliBingöl

Diyarbakir Batman

MardinSanliurfa

Adiyaman

Malatya

Elazig

Ordu

Sivas

Tokat

Kayseri

Nigde

Kahraman Maras

Gaziantep

Hatay (Antakya)

Adana

Amasya

Samsun

Sinop

Çorum

Yozgat

Kirsehir

Nevsehir

Aksaray

Icel(Mersin)

Karaman

Konya

ANKARA Kirikkale

Çankiri

Kastamonou

Zonguldak

Bolu

Sakarya(Adapazari)

Kocaeli(Izmit)

Istanbul

Kirklareli

Tekirdag

Edirne

Çanakkale

Balikesir

Bursa Bilecik

Eskisehir

Kütahya

Manisa

Izmir

AydinDenizli

Mugla

Antalya

BurdurIsparta

AfyonUsak

Bartin

Karabük

Osmaniye

Kilis

Yalova

Mediterranean Sea

Black Sea

Bosporus

Aeg

ean

Sea

Euphrates

Lake Van

Tigris

BeysehirGölü

TuzGölü

Gulf ofAntalya

Sea of Marmara(Marmara Denizi)

KebanReservoir

Euphrates

GEORGIA

ARMENIA

ISLAMICREP. OFIRAN

I R A Q

SYRIAN ARAB REPUBLIC

B U L G A R I A

GREECE

44°28°

40°40°

32° 36°

36° 36°

44°40°32°28°

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 100 200

KILOMETERS

TURKEY

JOINT POVERTY ASSESSMENT REPORT (JPAR)GROSS DOMESTIC PRODUCT BY STATISTICAL REGION

PROVINCE CAPITALS*

NATIONAL CAPITAL

PROVINCE BOUNDARIES

INTERNATIONAL BOUNDARIES

STATISTICAL REGION BOUNDARIES

2,500 .00 US$2,000 .00 US$1,500 .00 US$1,000 .00 US$

PER CAPITAL GROSS DOMESTIC PRODUCT,BY STATISTICAL REGION, 2001 AT CURRENT PRICES

*Province names are the same as their capitals.

IBRD 33582

SEPTEMBER 2004

TURKEY