Factors associated with the likelihood of being poor in Sri Lanka

Abstract

The incidence of consumption poverty in Sri Lanka has steadily declined over the last 30 years, especially after the war ended in 2009. Adopting Sen’s (1993) Capability approach, this study investigates the factors associated with consumption poverty in Sri Lanka using nationally representative sample survey data for the year 2016 which is the latest available data in Sri Lanka. The poverty threshold was determined as the poorest consumption quintile and the factors associated with the probability of being in the poorest quintile were investigated using binary logit regression estimation. The research finds that households’ demographic characteristics, capability endowments and spatial factors are significantly associated with the likelihood of poverty at the national level. Bigger households with bigger shares of children are shown to be more likely to be poor. Educational attainment of the household head emerges as one of the most important predictors of poverty while working in a skilled occupation significantly reduces the probability of being poor. The findings clearly show that households in the vulnerable regions of Northern, Eastern, Uva, and Sabaragamuwa provinces are most likely to be poor, all other things being equal. The study suggests that enhancing the standard of general and vocational schools in rural areas through more market-driven design of curricula; promoting rural economic diversification; investing in productive infrastructure; and, promoting the optimal allocation of resources between regions, are likely to help the poor earn their way out of poverty