Chronic and Transitory Poverty in the Kyrgyz Republic: What Can Synthetic Panels Tell Us? Unu‐merit Working Paper Series Unu-merit Working Papers Chronic and Transitory Poverty in the Kyrgyz Republic What Can Synthetic Panels Tell Us?

The Kyrgyz Republic has enjoyed remarkable success in poverty reduction in recent years. Poverty headcounts were halved between 2005 (63.9%) and 2008 (31.3%), before they slightly increased again to 33.7% (2010). However, these aggregate figures mask individual or household trajectories into and out of poverty. Additionally, the question arises as to who has remained poor for an extended duration, i.e. has been chronic poor. Since the panel component of the Kyrgyz Integrated Household Survey suffers from shortcomings, a synthetic panel based on repeated cross-sections is created to investigate poverty persistence and dynamics between 2005 and 2010, following an approach proposed by Dang, Lanjouw, Luoto, and McKenzie (2011). The share of chronic poor ranges between 23.6%-31.5%; that is to say, 74.8%-80.2% of the people classified as poor in 2010 have experienced it for an extended duration. At least two chronic poverty traps are identified: Spatial disadvantages occur in the rural oblasts of JalalAbad, Talas, and Naryn that are characterised by adverse topography and low levels of human capital. Moreover, poor work opportunities, particularly employment in informal, low-paid sectors with high income-insecurity, hinder escapes from poverty. These spatial and social traps coincide. Few people fell into poverty between 2005 and 2008, but the picture is more volatile in the years following the fuel and food crisis and the global financial and economic crisis. People employed in informal sectors are more vulnerable to economic downturns, leading to questions regarding the scope, extent and level of existing social safety nets.