Personal Consumption and Poverty Indicators

Mapping and Estimation of the Geographical Distribution of Risk of Poverty and Social Exclusion for Small Areas of the Republic of Croatia

Consumption approach

DESCRIPTION OF THE PROJECT

The Croatian Bureau of Statistics in cooperation with the World Bank conducted the project entitled Mapping and Estimation of the Geographical Distribution of Risk of Poverty and Social Exclusion for Small Areas of the Republic of Croatia. This activity is related to an initiative of the European Commission and the World Bank to estimate the risk of poverty for small areas (NUTS 2 level, NUTS 3 level or lower) in all EU Member States.

The main objective of this project is the development of a detailed
geo-referenced database that provides information about the geographic distribution of poverty and social exclusion. This database may then be used to create policies that focus on reducing poverty, promoting social inclusion and regional development. Furthermore, this project provides valuable statistical data that will help in the use of European structural and investment funds and ensure effective allocation of available funds intended for mentioned purposes.

Standard household surveys, Statistics on Income and Living Conditions (EU-SILC) and the Household Budget Survey (HBS) conducted by the Croatian Bureau of Statistics, are the main sources of information on poverty and social exclusion. Since these surveys include only a few thousand households in the sample, they are inadequate for assessing poverty and social exclusion for small geographic areas and provide reliable results only at the level of the Republic of Croatia.

Therefore, a project in which the World Bank experts have developed an analytical model for a Small Area Estimation (SEA) as well as the software for calculating these estimates (PovMap software) has been launched. The small area estimation model enables at-risk-of-poverty rate estimates for lower geographical levels and their illustrative presentation in a geographic map form. The model is set up in a way that combines the data from a household survey with the Census data, which provides data coverage for the lower geographical levels.

It is important to note that, due to the difference in the approaches used in estimating the results, they are not comparable with the results of other surveys on poverty (the SILC Survey).

Users should note that the at-risk-of-poverty estimates for towns and municipalities as well as districts of the City of Zagreb with less than 15 000 households are less accurate, according to the methodology used in the SAE model (Elbers, Lanjouw and Lanjouw – ELL, 2002). According to the Census 2011 data, there were a total of 548 of these types of towns and municipalities in the Republic of Croatia.

DATA SOURCE 

Census of Population, Households and Dwellings

The Census of Population, Households and Dwellings 2011 was carried out in the Republic of Croatia from 1 to 28 of April 2011, according to the situation as on 31 March 2011 at midnight, which is deemed to be the census moment.

Household Budget Survey 2011

The Survey collects data on the amount and the structure of expenditures for personal consumption of households by purpose and by the socio-economic characteristics of households. Data on housing conditions of households and equipment of households with durables are also collected in this Survey. The Survey was carried out on a random sample of private households. In 2011, there were 4 160 dwellings occupied by private households selected in the Survey sample and 2 335 households were successfully interviewed. The sample frame used for the selection of dwellings occupied by private households was based on the 2001 Census data. The response rate at the household level was 64%. The Survey field work was carried out in 26 two-week intervals throughout 2011.

Since the Project combines household survey data with the Census of Population, Households and Dwellings 2011 data, both data sources refer to the same time period.

CONSUMPTION APPROACH

The Survey provides for quality information on household consumption but the sample of households interviewed in 2011 was not sufficient to obtain reliable data for lower territorial levels other than national.

On the other hand, the Census data are comprehensive - complete geographical coverage and full coverage of households and population. However, they do not contain information on household consumption.

Small area estimation model, which is used for calculation, overcomes these limitations by making use of both data sources’ advantages.

The calculation according to the consumption approach is based on the concept of relative poverty, which defines the risk-of-poverty threshold by adult equivalent equal to 60% of the median equivalised consumption.

The first step in creating the small area estimation model was to define variables common in both surveys such as household size, distribution of household members by sex and age, education status, activity status, housing characteristics (surface area of a dwelling, number of rooms) and geographical location. For a selected set of joint variables, the analytical comparison of distributions is done at the national level and at the level of spatial units for statistics. Namely, the chosen set of variables should be comparable and consistent to ensure that the small area estimation model based on the HBS data can be applied to the Census data in order to produce reliable estimations of consumption of the whole population. Using the PovMap programme, simulation models have been derived and the equivalised consumption was calculated for each household in the Census. The risk-of-poverty threshold has also been defined. On the basis of calculated equivalised disposable consumption and comparison with a corresponding at-risk-of-poverty threshold, at-risk-of-poverty estimations have been calculated for various territorial levels.

DEFINITIONS

Household is every family or other community of individuals who live together and jointly spend their income in order to meet the basic existential needs (accommodation, food etc.). A household is also considered every person who lives alone (one-person household).

Household consumption comprises financial and natural consumption of products and services used to meeting existential needs of household members.

Equivalent consumption is calculated in a way that the total household consumption is divided by equivalised household size, calculated according to the modified OECD scale, in which the household head is given coefficient 1, every other adult in the household aged 14 and over is given coefficient 0.5 and every child under 14 years of the age is given coefficient 0.3. This procedure is applied in order to allot equal proportion (value) of consumption to each household, according to its needs.

The at-risk-of-poverty threshold is determined by calculating the equivalised consumption per household member for all households. After that, the middle value (median) of the consumption distribution is determined and 60% of the median is determined as the risk-of-poverty threshold. Persons with the consumption below the threshold are at a higher risk of poverty than others. The at-risk-of-poverty threshold is presented in kuna.

At-risk-of-poverty rate is a percentage of persons with the equivalised consumption below the at-risk-of-poverty threshold.

COMMENTARY

According to the small area estimation model and consumption approach, the estimated at-risk-of-poverty rate in the Republic of Croatia amounted to 17.1% in 2011, while the at-risk-of-poverty threshold was 23 919 kuna for a one-person household. It is estimated that 17.1% of persons had equivalised consumption below the threshold in the Republic of Croatia in 2011.

At-risk-of-poverty rate estimates at the NUTS 2 level in Continental Croatia amounted to 19.4%, and to 12.6% in Adriatic Croatia.

Looking at the estimates at the level of counties, they range from 5.9% to 34.3%. The lowest at-risk-of-poverty rate estimates, below 10%, were recorded in the City of Zagreb (5.9%) and in the County of Primorje-Gorski Kotar (9.1%), while the highest rates of around 34% were recorded in the County of Slavonski Brod-Posavina (33.9%) and Karlovac (34.3%).

For lower territorial levels, that is, for towns and municipalities as well as districts of the City of Zagreb which have less than 15 000 households, the at-risk-of-poverty rate estimates are less accurate. According to the Census 2011 data, there were a total of 548 of these types of towns and municipalities in the Republic of Croatia.