Abstract
This chapter investigates the dynamics of poverty in Egypt using monetary and non-monetary panel data, and the impact of trade liberalization on poor and low waged workers. We find a relatively low level of economic mobility in both income and non-income indicators, with the majority of those who were “poor” in 1998, whether in the monetary or non-monetary dimension, remaining so by 2006. Trade reform in the form of lower tariffs and increased export promotion exerted a small positive influence on the incomes of the poor; however, this came at the expense of greater informalization of workers and higher incidence of low quality jobs. We also find that private sector employment and gender have a much more important role in segregating the labor market.
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Notes
- 1.
- 2.
Many influential papers such as Dollar (1992), Sachs and Warner (1995), Edwards (1998), Frankel and Romer (1999), claimed to find a strong correlation between trade openness and growth. Anne Krueger’s words at her 1997 AEA Presidential address reflects the widespread belief in this link at that time: “It is now widely accepted that growth prospects for developing countries are greatly enhanced through an outer-oriented trade regime and fairly uniform incentives (primarily through the exchange rate) for production across exporting and import-competing goods (…). It is generally believed that import substitution at a minimum outlived its usefulness and that liberalization of trade and payments is crucial for both industrialization and economic development (…) the current consensus represents a distinct advance over the old one, in terms both of knowledge and of the prospects it offers for rapid economic growth” (Krueger, 1997, p.1). These views were not without critics, however. Rodriguez and Rodrik (1999)’s influential paper cast much doubt on the indicators for openness/lack thereof used in most of these studies. Rodriguez (2006) updated this study by focusing on more recent papers that dealt with openness-growth relationship, again arguing that their claims are not robust.
- 3.
World Bank (2007), page 6.
- 4.
World Bank (2007), page iv.
- 5.
In World Bank (2007), absolute poverty is defined as “spending less than needed to cover absolutely minimal food and non-food needs”, and near poverty is defined as “spending barely enough to meet basic food [needs] and slightly more than essential non-food needs”. (pages iii and iv)
- 6.
Economist Intelligence Unit, Country Profile (2007). Retrieved November 29, 2007 from www.economist.com.
- 7.
- 8.
Data from the HIECS are not made publically available except in published form by CAPMAS, and therefore we could not use it directly. Assaad and Roushdy kindly provided their constructed EPCC measure to us to help facilitate this research.
- 9.
Future work is underway to use a compensating differential approach to arrive at a better way of weighting the components of job quality.
- 10.
We also tried using the Food Price Index (based on the subgroup of food and beverages) available from CAPMAS to update the poverty lines as well as the income and consumption data. The poverty lines and the constructed transition matrices were almost identical to those reported here.
- 11.
Data on income available from the ELMS and ELMPS are only available for wage workers, and refers to total wage earnings from all jobs. We therefore restrict our sample to wage workers.
- 12.
Consider the PLs in Table A.1 for example: 2*FPL for all Egypt is 2, 059 EGP, which is 125 EGP above the UPL. Similarly, 2* FLEL for All Egypt is 528 EGP, 32 EGP above the ULEL. It is thus no surprise that we see the majority of individuals in both Tables 11.2 and 11.3 only moving up by one bracket.
- 13.
Transition matrices based on the other two job quality measures described at the end of Sect. 11.3 were almost identical, and are not shown to save on space.
- 14.
We define the classes for job quality with respect to deviations from each year’s mean. As the descriptive statistics show, the mean job quality index declined dramatically between 1998 and 2006 (from 0.085 to 0.055). If these classes had been defined with respect to the mean for both years, it would have appeared that a much larger number of people fell to “poor” quality jobs in 2006. We decided that a “relative’ notion of job quality, with respect to what the average worker was facing in each respective year, would be more impartial and provide a better insight into the changes in job quality that were actually going on in the labor market during that period.
- 15.
Although by limiting this study to the manufacturing sector, we might be missing the bulk of the non waged poor concentrated in rural and agricultural setting, our analysis is still informative about the potential for trade reforms to change the income and poverty status of the groups of workers in Egypt that are most likely to be directly affected by those measures, namely skilled and unskilled wage workers working in manufacturing industry.
- 16.
Recall from Sect. 11.3 that this incorporates the following six criteria: whether the worker (1) has social insurance, (2) has health insurance (3) has a contract, (4) has paid sick leave, (5) has paid annual leave, and (6) is a member of a trade union. Results based on the other two job quality indices were almost identical and are not shown to save on space.
- 17.
Export orientation and import penetration measures are arguably endogenous since they depend on factor costs, (see for example, Dutta 2007), yet it has been acknowledged that it is also not possible to satisfactorily address the issue due to absence of appropriate instruments in datasets similar to ours. To counter this, we avoid the use of contemporaneous trade flows and instead regress on lagged trade variables. In interpretation we also rely mostly on tariffs as the main measure of trade policy changes.
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Acknowledgments
We thank Ali Rashed and Randa Hamza for able research assistance and are grateful to Ragui Assaad, Valerie Bérenger, Florent Bresson and two anonymous referees for valuable comments and suggestions. The usual disclaimer applies. © Shireen AlAzzawi and Mona Said 2012.
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AlAzzawi, S., Said, M. (2013). Dynamics of Multidimensional Poverty and Trade Liberalization: Evidence from Panel Data for Egypt. In: Berenger, V., Bresson, F. (eds) Poverty and Social Exclusion around the Mediterranean Sea. Economic Studies in Inequality, Social Exclusion and Well-Being, vol 9. Springer, Boston, MA. https://doi.org/10.1007/978-1-4614-5263-8_11
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