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Rural Poverty Determinants in the Remote Rural Areas of Kyrgyzstan

A Production Efficiency Impact on the Poverty Level of a Rural Household


Kanat Tilekeyev

This book is a study about rural poverty in the remote rural area of Kyrgyzstan. It analyses the linkage of poverty with the limits of production frontier efficiency of the rural households in the selected area. A field survey of the cross-section random sample collects primary information about 297 rural households. This allows to measure rural poverty and frontier production efficiency of a sample, using Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA) methods. The empirical results demonstrate statistical significance of the poverty-efficiency linkage in the case of simple and multivariate linear regression. The endogeneity problem is resolved with the proposed instrumental variables, not correlating with the wealth of the household, but affecting the technical efficiency.
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1. Introduction



Poverty and mainly rural poverty, is an important problem in Kyrgyzstan. Poverty in the country definitely existed in the pre-transition period, but the fall of the Soviet Union led to a sharp increase of the poverty level in the 1990s. The following decline of poverty, in the last decade of transition, is based on the recovery of the rural sector, growth of the trade in Central Asia and changing patterns of labor migration. Nevertheless, poverty reduction was not uniform and not stable due to an overall economic decline in the world and an increase of the main food prices. Rural remote areas in the country suffer from weak growth, a low capacity of the financial resources and the lack of human capital. The poverty level in those areas is volatile and steadily higher than the average trends in the country. This work is an attempt to study the determinants of poverty in the rural remote areas of Kyrgyzstan.

Sensitivity of the poverty rates to such variables as agricultural labor and overall economic production indicators (GDP, agricultural output and average wage) was detected on a country and a regional level. The linkage of poverty with the agricultural production capacity in the rural areas was selected as a working hypothesis. Further study of the production theory developments brings us to a separate area of the production function methods known as frontier approach. The main idea of the frontier theory is an explanation of the difference among producers,...

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