Determinants of Household Poverty: Identification Using Logistic Regression

Abstract

Abstract: The fight against poverty is considered one of the most critical tasks in achieving sustainable development goals. This study aims to identify the key determinants of household poverty in Algeria. The information base is data from the Sixth Cluster Survey (MICS 6) conducted by the National Statistics Office during 2018-2019 with a sample of 31,325 households in each province, which are divided into three groups (poorest, poor, non-poor) using a well-being index, which is based on the data about household assets and living conditions. Polynomial logistic regression was used to model the correlation between the poverty status of households and various demographic (household size, gender, age and education level of the head of the household), socio-economic (employment of the head of the household) and spatial (place of residence (urban/rural), region) characteristics. The results showed that a higher level of education of the head of the household significantly increased the probability of households moving from the "poorest" to the "poor" or "non-poor". As the age of the household head increases, the likelihood that the household will be non-poor increases. The gender of the head of the household was not a statistically significant factor. The increase in the number of dependents as a factor of creating additional financial pressure and falling into poverty is essential only in a situation of a very drastic change in status - when moving from the status of "non-poor" to "the poorest". In contrast, a slight change in well-being (a shift from "poor" to "poorest") is not associated with an increase in the number of household members. Modeling showed that extreme poverty is more common in rural areas than in cities. Regional differences are also revealed, as the poverty level is higher in the southern regions than in the northern ones. The slight increase in household welfare (transition from the category of "poorest" to "poor") in Algeria is not due to the economic activity of the head of the household. Still, it may be related to the nature of the analyzed data (only the fact of employment was considered without specifying the nature and type of activity). Instead, a significant change in welfare (moving from the category of "non-poor" to "poorest" households) directly depends on whether the head of the household is employed or unemployed. The results of the study are essential in the context of the development of a targeted policy to reduce the poverty risks of Algerian households: increasing the level of education and skills should be a priority, especially for young people and in disadvantaged regions, targeted programs for the development of rural areas and mechanisms for the fair distribution of public investments between provinces are needed to overcome regional disproportions.