16 February 2012

Why has poverty fallen in Rwanda?

Following the presentation of the headline 12% point reduction in poverty over the last 5 years in Rwanda, the full reports are now available from the National Institute of Statistics (here and here).
One contributory factor will be the reduction in average household size over the period (implying reduced consumption needs); this is consistent with the declining fertility rate reported in the DHS surveys. 
Based on the income data, the survey results show an important increase in the contribution of wage income and also an increase in income from transfers; the share of agricultural income falls modestly though remains the majority source of income.  
Analysis of the survey data confirms the importance of wage activity by identifying that there has been substantial creation of jobs, predominantly in non-farm activities, over the past five years. Which areas these jobs are in, still needs to be investigated in subsequent work.  
A second factor identified from the survey data is increased agricultural production. Looking at aggregate production data confirms significantly higher production levels in 2010/11 than 2005/06, most strikingly in the Northern Province followed by the Western Province (the key producing regions), and this is despite the fact that average land size cultivated per household has fallen over the period. This pattern of increased production is consistent with production data from MINAGRI. At the same time, there was a substantial increase in the use of chemical fertilisers in agriculture over this period. 
A third factor has been increased commercialisation of agriculture. In 2005/06, households sold around 18% of their output on average but by 2010/11 the average proportion of output sold had risen to 25%. There was increased demand for agricultural production from Rwanda over this period from neighbouring countries and in part in response to food crises elsewhere. A fourth factor is the increasing importance of transfers over the period, both private and public. While these do not just benefit the poor, they have contributed to poverty reduction over the period.

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