WP P151472 PUBLIC Moldova Poverty Assessment 2016 PDF

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1
Poverty and Shared Prosperity in Moldova: Progress and Prospects
Report No. 105722-MD
Poverty
Reduction and
Shared Prosperity
in Moldova:
Progress
and Prospects
Poverty and Equity Global Practice
World Bank Group
May 2016
Table of Contents
Acknowledgments.......................................................................................................................................... viii
Executive Summary...........................................................................................................................................ix
Overview..............................................................................................................................................................x
I. Introduction.......................................................................................................................................................1
II. Progress in poverty reduction and shared prosperity.......................................................................................3
Poverty declined in Moldova ....................................................................................................................3
... and the country reduced inequality and boosted shared prosperity................................................5
Progress was underpinned by high upward economic mobility...........................................................7
Yet, Moldova is one of the poorest countries in Europe.........................................................................8
III. What drove poverty reduction and shared prosperity?.................................................................................10
Economic growth was volatile, but positive and pro-poor overall.....................................................10
Labor markets aided the progress mainly by nonagricultural wage increases..................................11
Public transfers, mainly pensions, drove some improvement in living standards............................16
Migration and remittances have shaped growth, poverty reduction, and shared prosperity..........17
IV. Abiding challenges and the issue of sustainability.........................................................................................21
Spatial and cross-group inequalities persist...........................................................................................21
Important and increasing risks to sustainable progress persist...........................................................30
V. Conclusion......................................................................................................................................................36
VI. References.....................................................................................................................................................38
Annex A. Characteristics of the poor and bottom 40..................................................................................40
Annex B. Nonmonetary poverty.....................................................................................................................45
iii
Figures
Figure 1. Poverty rate and GDP per capita, latest available...................................................................x
Figure 2. Welfare growth of the bottom 40 and average population, latest available........................x
Figure 3. GDP growth, 2001–15...............................................................................................................1
Figure 4. Real GDP index (2007 = 100)...................................................................................................1
Figure 5. Employment rate by demographics and location, 2000–14..................................................2
Figure 6. Activity rate by demographics and location, 2000–14..........................................................2
Figure 7. Poverty headcount ratio, 2007–14............................................................................................3
Figure 8. Poverty rates, by urban and rural areas, %..............................................................................5
Figure 9. Poverty rates, by region, %........................................................................................................5
Figure 10. Poverty gap, by urban and rural areas...................................................................................5
Figure 11. Poverty gap squared, by urban and rural areas..........................................................................5
Figure 12. Real consumption per capita growth, by group...................................................................6
Figure 13. Dynamics of consumption per capita inequality.................................................................6
Figure 14. Real consumption growth, urban areas......................................................................................6
Figure 15. Real consumption growth, rural areas...................................................................................6
Figure 16. Real consumption growth, the bottom 40 and total population, by country...................7
Figure 17. Households in poverty that escaped poverty or the nonpoor who fell into poverty, %......7
Figure 18. Intragenerational mobility, by share of the population, Moldova, 2007–14.....................8
Figure 19. GDP per capita and $5.00-a-day poverty, Europe and Central Asia, latest available data......9
Figure 20. Welfare group decomposition, by country, latest available data........................................9
Figure 21. GDP growth decomposition...................................................................................................10
Figure 22. GDP and household income and consumption growth.....................................................11
Figure 23. Growth incidence curve, total population, 2007–14...........................................................11
Figure 24. Datt-Ravallion decomposition of changes in the decline in the poverty rate..................11
Figure 25. Decomposition of income growth, the bottom 40, by income source, 2007–14, %........12
Figure 26. Decomposition of changes in poverty, by income source, 2007–14, % points.................12
Figure 27. Reason for unemployment or inactivity, 15–65 age-group, 2014......................................12
Figure 28. Underemployment among the employed ages 15+, 2014...................................................12
iv
Figure 29. Employment status of the poor..............................................................................................13

Figure 30. Employment status of the bottom 40.....................................................................................13
Figure 31. Population distribution, manufacturing and investment, by location, 2014....................13
Figure 32. Share of employment abroad in total employment, %........................................................13
Figure 33. Employment in agriculture.....................................................................................................14
Figure 34. Employed populations, by sector...........................................................................................14
Figure 35. Employment sector of the poor..............................................................................................14
Figure 36. Employment sector of the bottom 40....................................................................................14
Figure 37. Average monthly salary earnings for employees, by sector................................................15
Figure 38. Monthly labor income, bottom 40 and top 60......................................................................15
Figure 39. Share of low-intensity agriculture among adults (aged 15+)..............................................15
Figure 40. Real growth, average monthly pension, % year-on-year.....................................................16
Figure 41. Real growth, average monthly pension, by welfare group, % year-on-year......................16
Figure 42. Income structure of the poor, %.............................................................................................16
Figure 43. Income structure of the bottom 40, %...................................................................................16
Figure 44. Income structure, poor, by area..............................................................................................17
Figure 45. Income structure, bottom 40, by area....................................................................................17
Figure 46. Real year-on-year growth of social assistance, by group.....................................................17
Figure 47. Share of social assistance in overall income, by group........................................................17
Figure 48. Adult population (15+) who are active in Moldova or abroad, 2000–14..........................18
Figure 49. Remittances as a share of monthly disposable household income, 2006–14, %..............19
Figure 50. Remittances as a share of GDP, 2014.....................................................................................20
Figure 51. Household welfare ranking before (left) and after (right) remittances.............................20
Figure 52. Urban population share in selected countries, %.................................................................21
Figure 53. Type of settlement, poor and nonpoor.......................................................................................22
Figure 54. Type of settlement, bottom 40 and top 60..................................................................................22
Figure 55. Age composition of the poor..................................................................................................24
Figure 56. Age composition of the bottom 40.........................................................................................24
v
Figure 57. Poverty rate, by household composition....................................................................................24

Figure 58. Dependency ratio, the poor and nonpoor..................................................................................24
Figure 59. Composition, remittance households....................................................................................25
Figure 60. Poverty rate, by age..................................................................................................................25
Figure 61. Living conditions and access to utilities, poor.....................................................................25
Figure 62. Living conditions and access to utilities, bottom 40............................................................25
Figure 63. Level of education of among poor and nonpoor adult population...................................26
Figure 64. Level of education of among bottom 40 and top 60 adult population..............................26
Figure 65. Population, by health status....................................................................................................27
Figure 66. Nonmonetary indicators.........................................................................................................29
Figure 67. Nonmonetary poor, by region................................................................................................29
Figure 68. Share of people deprived in each dimension........................................................................30
Figure 69. Contribution of each dimension to multidimensional poverty.........................................30
Figure 70. Overlap, nonmonetary and monetary poor.........................................................................30
Figure 71. Nonmonetary poverty, by subjective well-being and consumption quintiles..................30
Figure 72. Demographic composition, 2000–30....................................................................................31
Figure 73. Age-gender pyramid, 2015–60...............................................................................................31
Figure 74. Adult (15+) dependency ratio: inactive population relative to active population, 2013.........32
Figure 75. Pension system dependency ratio, number of pensioners per contributor......................32
Figure 76. Pension coverage, population above standard retirement age...........................................32
Figure 77. Replacement rates, selected countries...................................................................................33
Figure 78. Replacement rates, 2013–2069...............................................................................................33
Figure 79. Remittances to Moldova, 1995–2015.....................................................................................33
Figure 80. Value added in agriculture and GDP growth, 2001–14......................................................34
Figure 81. Composition of the consumption of the poor and nonpoor..............................................35
Figure 82. Composition of the consumption of the bottom 40 and top 60........................................35
Figure 83. Consumer price indicators, year-on-year, 2007–15.............................................................35
vi
Tables
Table 1. Moldovan labor emigrants, by labor sector in home and destination countries, 2012.......40
Table 2. Multidimensional poverty index: dimensions and indicators................................................40
Boxes
Box 1. National Poverty Measurement Methodology............................................................................4
Box 2. Transport and Household Welfare in Moldova..........................................................................22
Box 3. Out-of-Pocket Health Spending...................................................................................................27
vii
Acknowledgments
This report has been prepared by María E. Dávalos (Senior Economist,
TTL), Tu Chi Nguyen (consultant), and Mikhail Matytsin (consultant)
of the World Bank Poverty Global Practice. The team is grateful for
comments received from World Bank colleagues, including Reena
Badiani, Hanan Jacoby, Ruth Hill, and Ruslan Piontkivsky, and for
comments received in early consultations in Chișinău in June 2015.
We thank Qimiao Fan (Country Director), Carolina Sánchez-Páramo

(Practice Manager), and Alexander Kremer (Country Manager) for their
guidance and support. Most importantly, we thank the management and
staff of the National Bureau of Statistics of Moldova for their hard work
in producing survey data for Moldova and for their collaboration with
the World Bank team.
viii
Executive Summary
Moldova has experienced rapid economic growth in the past decade,
which has been accompanied by reductions in poverty and good
performance in shared prosperity. Nonetheless, Moldova remains one of
the poorest countries in Europe and faces challenges in sustaining the
progress.
Analysis of the Household Budget Surveys from 2007 to 2014 shows that
economic growth was volatile, revealed once more in developments during
2015, but, overall, positive and pro-poor. Economic growth was driven
generally by private consumption, fueled by remittances, and household
consumption expanded accordingly. Public and private transfers, namely,
pensions and remittances, had an important role in reducing poverty.
Moldovan labor markets contributed to the progress, mostly through
productivity increases rather than job creation, given that employment fell
driven by increasingly high inactivity rates. On average, the declines in
employment were partly offset by the higher wages in the nonfarm sectors.
The challenges for progress include spatial and cross-group inequalities,

particularly because of unequal access to assets, services and economic
opportunities. Moreover, strengthening the persistently weak labor
markets to boost employment, especially in the nonfarm sectors, is
critical for sustaining progress toward the twin goals of reducing poverty
and expanding shared prosperity and for addressing the problems
associated with an aging population in a fiscally responsible manner.
Accordingly, ensuring the viability of the pension system and improving
social assistance are necessary areas of reform, particularly in a context
of fiscal pressures, the aging population, and the great vulnerability of
the poor to shocks.
The Moldova Poverty Assessment 2016 includes three prongs of analysis:

this report, which explores trends and the drivers of poverty and shared
prosperity, and the accompanying analyses, “A Jobs Diagnostic for
Moldova” and “Structural Transformation of Moldovan Small-Holder
Agriculture and Its Poverty and Shared Prosperity Impacts.” The jobs
diagnostic explores the main labor demand and supply challenges in
Moldova in more detail, while the analysis of structural transformation
focuses on the agricultural sector and whether it can become a driver of
progress.
ix
Overview
Overview
Moldova has experienced rapid economic growth in the past decade,
Moldova
accompaniedhasbyexperienced rapid ineconomic
significant progress growthand
poverty reduction inshared
the past decade, accompanied by
prosperity.
significant
The economyprogress in poverty
has been growing reduction
at 5 percent and
annually sinceshared
2000. Atprosperity.
the same time,The economy has been
the national
growing poverty rate
at 5 percent dropped
annually sincefrom 68 to
2000. At27thepercent between
same time, the2000 and 2004
national poverty rate dropped from
and continued the downward trend to 11.4 percent in 2014. Similarly, inequality,
68 to 27 percent between 2000 and 2004 and continued the downward trend to 11.4 percent in
measured as the Gini coefficient, declined from 0.3 to 0.23 between 2007 and 2014,
2014. Similarly,
and the consumptioninequality,
growth measured as the40Gini
of the bottom coefficient,
outpaced declined
that of the top 60 from 0.3 to 0.23 between 2007
in 2009-
and 2014,
2014. andpro-poor
Given the consumption
growth, thegrowth
countryof the bottom
experienced 40 outpaced
a dynamic thatofof
process the top 60 in 2009-2014.
high
Given
upwardpro-poor
economicgrowth,mobilitythe
andcountry experienced
little churning (that is, acontemporary
dynamic process of high upward economic
movements
in and outand
mobility of poverty). Its achievements
little churning (that is,in poverty reductionmovements
contemporary and shared prosperity
in and out of poverty). Its
have been impressive given its economic level and compared with other countries
achievements in poverty reduction and shared prosperity have been impressive given its economic
in Europe and Central Asia (Figure 1 and Figure 2). Yet, with one of the highest
level andrates
poverty compared with other
in the region countries
– 41 percent in population
of its Europe and Central
lived below Asia (Figure 1 and Figure 2). Yet,
the regional
with
line one of the
of 5 USD highest
a day (2005poverty rates Moldova
PPP) in 2014, in the region
needs–to41 percentthis
continue ofprogress.
its population lived below the
regional line of 5 USD a day (2005 PPP) in 2014, Moldova needs to continue this progress.
Figure 1. Poverty rate and GDP per capita, Figure 2. Welfare growth of the bottom 40 and
latest 1.available
Figure Poverty rate and GDP per capita, latest average population,
Figure 2. latest available
Welfare growth of the bottom 40 and
available average population, latest available
90 10%
90
[CELLRA 8%
80 [CELLRA
80 NGE] [CELLRA 6%
USD 2005 PPP)
70 NGE] 4%
NGE]
[CELLRA
Poverty rate (5USD 2005 PPP)
70 2%
60 NGE]
0%
60
50 -2%
40
50 [CELLRA -4% Bottom 40%
30 [CELLRA NGE] -6% Total Population
40
Poverty rate (5
-8%
Macedonia, FYR (2009-…
NGE] [CELLRA [CELLRA

20 [CELLRA -10%
Russian Federation…
Bosnia&Herzegovina…
Slovak Republic (2007-…
30 NGE] NGE] NGE]

Slovenia (2007-2012)
Kazakhstan (2009-2013)
Georgia (2009-2014)
Albania (2008-2012)
Armenia (2009-2014)
Romania (200.7-2012)
Turkey (2008-2013)
Ukraine (2009-2014)
Moldova (2009-2014)
Belarus (2009-2014)
Montenegro (2009-2014)
Serbia (2008-2013)
Bulgaria (2007-2012)
Tajikistan (2012-2014)
10
Kyrgyz Republic…
20 [CELLRA
0 [CELLRA [CELLRA
[CELLRA
[CELLRA NGE]
0 5,000 10,000 15,000 NGE] [CELLRA
20,000 25,000
NGE]
10 NGE] [CELLRA
NGE] [CELLRA
[CELLRA
[CELLRA NGE]
NGE]
[CELLRANGE]
GDP per capita (2011 PPP) NGE]
0 NGE]
NGE]
0 5,000 10,000 15,000 20,000 25,000
GDP per capita (2011 PPP)
Source: ECAPOV database harmonization as of April 2016, Europe and Central Asia Team for Statistical Development, World Bank,
Source: ECAPOV
Washington, DC. database harmonization as of April 2016, Europe and Central Asia Team for Statistical Development, World Bank, Washington, DC.
The past progress has been driven mainly by pensions and remittances. Economic growth in
Moldova has been mostly driven by private consumption, which was in turn fueled by remittances.
Private consumption contributed as much as x5.7 percentage points to GDP growth in 1999–2014.
Remittances account for 26 percent of GDP in 2014, making Moldova one of the countries most
dependent on remittances. More than 25 percent of Moldovan households received remittances,
The past progress has been driven mainly by pensions and remittances. Economic
growth in Moldova has been mostly driven by private consumption, which was in
turn fueled by remittances. Private consumption contributed as much as 5.7
percentage points to GDP growth in 1999–2014. Remittances account for 26 percent
of GDP in 2014, making Moldova one of the countries most dependent on
remittances. More than 25 percent of Moldovan households received remittances,
which make up around 18 percent of their income. Remittances helped lift many
households, particularly rural ones, out of poverty, and contributed to 21.6 percent
of the income growth of the bottom 40 in 2010–14. Similarly, as the government
raised pensions to support vulnerable categories, especially during the global crisis,
pensions has become the main driver of poverty reduction and shared prosperity,
accounting for more than 30 percent of the consumption growth of the bottom 40
in 2007–14.
Labor markets contributed to the progress, but mostly through nonagricultural

wage increases rather than employment creation. Employment has been declining
(from 55 percent in 2000 to below 40 percent in 2014), especially in rural areas. This
trend is associated with rising inactivity driven by increasing migration and early
retirement among the aging population. With the exceptions of agriculture after
2012 and a few trade-related sectors such as sales, tourism, and transport,
employment in most sectors have been on the decline. In contrast, the share of
people working in low-intensity agriculture (less than 20 hours a week) has been
rising steadily, from 13 percent to 24 percent. Wage growth has been positive, but
mainly in the nonagricultural sectors and less in agriculture where the majority of
the poor and the bottom 40 work. As a result of this differential wage growth,
combined with the shift toward subsistence farming (especially among the poor and
bottom 40), the gap in labor income (including wages and self-employment earnings)
between the bottom 40 and the top 60 has shown limited signs of narrowing.
There are concerns about the sustainability of past achievements as the poor and
bottom 40 continue to lack the necessary capital to advance. The slow growth of
the agriculture sector and the limited access to markets, non-farm jobs, and modern
services mean that people in rural areas are persistently poorer. Coverage of heating,
piped water, sewage is limited among the rural population (and the poor and bottom
40). The poor and bottom 40 also have much less educational attainment and own
smaller plots of land, which limit their opportunities to gain (better) jobs and
improve productivity. And even though they have similar health profiles as the
nonpoor, they are less likely to have medical insurance, hence suffer from low quality
healthcare or high out-of-pocket spending, which drives them further into poverty
in the long term. The same constraints apply to the ethnic minorities, who, because
of language barrier or disparities in access to services, end up in worse welfare
situation. These dimensions of wellbeing, including educational, health, employment,
and housing status, determine a person’s capacity to enjoy decent social and
economic living standards. This report measures the deprivations of individuals
along these dimensions and finds that 24 percent of the population are considered
multidimensionally poor in 2014, more than twice the number of those who are
monetary poor, and there has been limited improvement since 2007.
xi
Continued progress in poverty reduction and shared prosperity face tremendous

risks due to long-term fiscal pressures and high volatility in the economy. Driven
by declining fertility and accelerating emigration among the young population, the
population of Moldova is shrinking and aging rapidly. Combined with low labor
force participation, the contribution base of the pension system will contract, hence
undermining the system sustainability and reducing pension coverage of the
retirees. Even though pensions have not been generous and often insufficient to lift
many of the elderly out of poverty – the poverty rate among the elderly is higher
than the population average, their potential contraction may jeopardize the
economic security of the elderly. At the same time, the economic slowdown in the
European Union and Russia is hampering the remittance inflows and growth rates
of remittances is expected to be slower than in the past, making it less likely for
households to rely on this income source to sustain their consumption. Finally, the
agriculture sector is subject to high volatility due to climate and external demand
shocks. Since the poor rely on agriculture as a major part of their income and
consumption, any fluctuations in the sector will affect their wellbeing directly.
Meanwhile, social assistance has limited potential to serve as a safety net for the
poor and vulnerable. The main targeted programs are Ajutor Social (social aid) and
a heating allowance program, both of which are relatively well targeted, but the
coverage is not wide and the benefits low, which constrains the ability of the
programs to respond to widespread downturns in household income.
These challenges point to the need to promote a more vibrant domestic labor
market to lead future progress in poverty reduction and shared prosperity. This
involves creating more (and better) jobs and enhancing access to education, health,
and services to allow individuals to access those jobs. Some of these policies need to
pay additional attention to the abovementioned structural issues, in particular: (i)
aging – efforts to promote active and healthy aging can help people work longer and
reduce the looming economic dependency ratio growth; (ii) regional and group
disparities – policies to ensure equitable opportunities for rural populations and
ethnic minorities can allow people to better contribute to the economy; and (iii)
economic and climatic shocks – policies to increase adaptation and mitigation of
climatic shocks, including through social assistance programs to protect the
vulnerable in times of needs. Measures to help households manage and adapt to
risks need to be complemented with labor market policies aimed at diversifying
household income sources – particularly for the poor who rely disproportionately
more on agricultural income.
The report is structured as follows. The first section lays out the overall
macroeconomic environment of Moldova in recent years and briefly summarizes
the report findings. Section II describes trends in poverty reduction and shared
prosperity in Moldova. Section III provides analysis of the main factors behind the
progress. Section IV continues by assessing the sustainability of the progress and
pointing out the remaining challenges and risks. The last section discusses policy
implications and concludes.
xii
I. Introduction
1. Introduction
Moldova has experienced rapid economic growth in the past decade, despite volatility. The
country has grown on average by 5 percent annually since 2000 (Figure 3), much more rapidly than
other countries in the region (Figure 4). Even with the sharp contraction during the global financial
Moldova has experienced rapid economic growth in the past decade, despite volatility. The country has
crisis of
grown on2008–09,
average byMoldova
5 percent continued
annually sinceto grow quickly3),
2000 (Figure until
much 2014,
moreaveraging 5.4 other
rapidly than percent growthin in
countries
2010–14.
the Its economic
region (Figure 4). Even growth trajectory
with the sharp has been
contraction increasingly
during volatile, crisis
the global financial however. As a Moldova
of 2008–09, small and
open economy,
continued to growMoldova
quickly hasuntilborne
2014, not only several
averaging external
5.4 percent economic
growth shocksItsineconomic
in 2010–14. the past, growth
but also
trajectory has been
climatic shocks thatincreasingly volatile,affected
have particularly however.its
Asagricultural
a small andsector,
open economy,
as well asMoldova
the widerhaseconomy.
borne notIn
only several external economic shocks in the past, but also climatic shocks that have particularly affected its
2015, a confluence
agricultural of events
sector, as well pushed
as the wider the economy
economy. In 2015,into a downturn
a confluence (−0.5
of events percent
pushed growth ininto
the economy gross
a
domestic product
downturn [GDP]
(−0.5 percent in 2015)
growth anddomestic
in gross projections of little
product [GDP] growth in 2016.
in 2015) The mainoffactors
and projections behind
little growth
in
this2016. Thepoor
recent mainperformance
factors behindare thisweaker
recent poor performance
external are weakerbank
flows, large-scale external flows,
fraud, andlarge-scale
a drought,bank
all of
fraud, and a drought, all of which took place in an environment
which took place in an environment of political instability. 1 of political instability.
1
Figure 3. GDP growth, 2001–15 Figure 4. Real GDP index (2007 = 100)
140
10
8
6 120
4
2 100
0
-2 2000 2002 2004 2006 2008 2010 2012 2014 80
-4 2007 2008 2009 2010 2011 2012 2013 2014 2015
-6 Albania Bosnia & Herzegovina
Georgia Croatia
-8 Moldova Macedonia, FYR
Romania Serbia
Moldova ECA Slovak Republic Slovenia
Sources: World Development Indicators database, World Bank; Sources: World Bank 2016b, based on WDI and IMF WEO.
World Bank 2016a.
Labor
Labor market
marketoutcomes
outcomes areareweak in Moldova,
weak in Moldova, and and
inactivity rates rates
inactivity are high. Employment
are high. has been
Employment has
declining, especially in rural areas, driven by increasing migration and early retirement
been declining, especially in rural areas, driven by increasing migration and early retirement among among the aging
population. Even though the adult population (aged 15+) has stabilized in recent years, the share of people
the agingorpopulation.
working looking for aEven though
job abroad hasthe adult population
increased (agedin
from 4.3 percent 15+)
2000has stabilized
to 10 percent in in 2014,
recentleading
years,tothe
ashare of people
declining working orInlooking
active population. addition, for
thea retirement
job abroad agehas increasedis relatively
in Moldova from 4.3low percent
(56 forinwomen
2000 andto 10
61 for men) and, post-retirement employment is low — 30.5 percent in 2014.
percent in 2014, leading to a declining active population. In addition, the retirement age in Moldova
2
As a result, the employment rate
decreased drastically
is relatively low (56from for 55 percentand
women in 2000
61 toforbelow
men)40and,
percent in 2014, with the
post-retirement biggest decrease
employment in rural
is low—30.5
areas (22 percentage 2 points) ( Figure 5). Unemployment is low, fluctuating around 3 percent during the
percent in 2014. As a result, the employment rate decreased drastically from
period, but inactivity has been on the rise, from 40 percent in 2000 to 59 percent in 2014 (Figure 6). 55 percent in 2000 to
below 40 percent in 2014, with the biggest decrease in rural areas (22 percentage points) (Figure 5).
1 World Bank (2016a).
Unemployment
2 Labor Force Survey.is low, fluctuating around 3 percent during the period, but inactivity has been on the
rise, from 40 percent in 2000 to 59 percent in 2014 (Figure 6).
1
1 World Bank (2016a).
2 Labor Force Survey.
Figure 5. Employment rate by demographics and Figure 6. Activity rate by demographics and
location, 2000–14 location, 2000–14
60 65
60
55
55
50
50
45
45
40 40
35 35
30 30
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
urban rural men women urban rural men women
Source: World Bank calculations based on the Moldova National Bureau of Statistics (NBS) data.
How has Moldova fared in poverty reduction and shared prosperity in recent years? National poverty
How hasreveal
estimates Moldova fared in
a downward poverty
trend reduction
in poverty and shared
in the 2000s prosperity
and earlier. in recent
This is good news. Ityears? National
is important,
however, to understand
poverty estimates revealtheatrends by focusing
downward trendon in various
povertywelfare
in the indicators
2000s andacross groups
earlier. This, digging
is gooddeeper
news. It
into the forces behind the progress so far, and exploring whether these driving factors are sustainable so that
is important, however, to understand the trends by focusing on various welfare indicators across
the prospects will be equally positive among the less well off.
groups,
This paperdigging deeper
aims to assess theinto
recentthe forces
trends behindof the
and drivers progress
poverty decline andso shared
far, and exploring whether
prosperity—the twin goalsthese
of
driving
the Worldfactors areMoldova
Bank—in sustainable so that
and the the prospects
potential will be
challenges ahead. equally
It relies positive
on data of the among theBudget
Household less well off.
Survey
(HBS) from 2007 to the latest year available, 2014, produced by the Moldova National Bureau of Statistics (NBS).
This paper aims to assess the recent trends and drivers of poverty decline and shared
prosperity—the
Findings from this twin goalsshow
assessment of the World Bank—in Moldova and the potential challenges
the following:
• Moldova
ahead. exhibited
It relies on good
data performance in reducing
of the Household povertySurvey
Budget and inequality
(HBS) and boosting
from 2007 shared
to theprosperity.
latest year
This progress was underpinned by high upward economic mobility.
available, 2014, produced by the Moldova National Bureau of Statistics (NBS).
• Economic growth was volatile, but positive and pro-poor overall. Public and private transfers, namely,
pensionsfrom
Findings and this
remittances,
assessment had show
an important role in reducing poverty. Moldovan labor markets
the following:
contributed to the progress, mostly through productivity increases rather than job creation, given that
 employment
Moldova exhibited goodthe
declined over performance
period, driven inbyreducing
high andpoverty and inequality
rising inactivity rates. and boosting shared
hallenges remain,
• Cprosperity. and the was
This progress prospects are not too
underpinned by favorable.
high upward Spatial and cromobility.
economic ss-group inequalities persist,
particularly in the unequal access to assets and services among, for example, rural areas and ethnic
 minorities.
Economic growth was volatile, but positive and pro-poor overall. Public and private transfers,
namely, pensions
• Important and growingandrisks
remittances,
to sustainablehad progress
an important
persist.role in reducing
Remittances poverty. may
and pensions Moldovan labor
not remain
crucial forces behind progress in the future, given the changing external
markets contributed to the progress, mostly through productivity increases rather than job environment and the fiscally
unsustainable
creation, given pension
that system.
employmentIn addition,
declinedthe less well-off
over are increasingly
the period, driven vulnerable
by high and to climate
rising shocks.
inactivity
This report is accompanied by two additional parts that are also critical to understanding two of the
rates. that Moldova faces: weak labor markets (explored in “A Jobs Diagnostic for Moldova”) and a low
challenges
 Challenges
productivity remain, and
agricultural sectortheinprospects
which many are not
of thetoopoor
favorable. Spatial and(explored
are concentrated cross-group inequalities
in “Structural
Transformation of Moldovan
persist, particularly Small-Holder
in the unequal access Agriculture andand
to assets Its Poverty
servicesand SharedforProsperity
among, example,Impacts” ).
rural areas
Together, the three parts represent the Moldova Poverty Assessment 2016. They will provide significant inputs to the
and ethnic minorities.
more comprehensive approach of the Moldova Systematic Country Diagnostic, which precisely explores the
 Important
main constraints,and growing
across risks to to
the economy, sustainable
achieving progress
progress in persist.
povertyRemittances
reduction and andshar
pensions may not
ed prosperity. 3
Emerging
remainmessages
crucialindicate that creating
forces behind jobs isincritical
progress to raising
the future, people’s
given living standards
the changing in aenvironment
external sustainable way and
in Moldova and to alleviating pressures related to aging and the fiscal system.
the fiscally unsustainable pension system. In addition, the less well-off are increasingly vulnerable
This document is organized as follows. The next section (section II) describes trends in poverty reduction
to climate
and shared shocks.
prosperity in Moldova. Section III provides analysis of the main factors behind the advances. To
assess
This the prospects,
report this discussionby
is accompanied is followed, in sectionparts
two additional IV, by that
an analysis
are alsoof thecritical
remaining challenges and
to understanding
risks. The last section discusses policy implications and concludes.
two of the challenges that Moldova faces: weak labor markets (explored in “A Jobs Diagnostic
for See
3
Moldova”) and a low productivity agricultural sector in which many of the poor are concentrated
World Bank (2016b).
2
14
Systematic Country Diagnostic, which precisely explores the main constraints, across the economy,
to achieving progress in poverty reduction and shared prosperity.3 Emerging messages indicate that
creating jobs is critical to raising people’s living
Poverty and standards in a sustainable
Shared Prosperity in Moldova:way in Moldova
Progress and to
and Prospects
alleviating pressures related to aging and the fiscal system.
Progress in poverty
This document is organized as follows. The next section (section II) describes trends in poverty
reduction and shared prosperity in Moldova. Section III provides analysis of the main factors behind
2.
reduction and shared
the advances. To assess the prospects, this discussion is followed, in section IV, by an analysis of the
remaining challenges and risks. The last section discusses policy implications and concludes.
II.
prosperity
Progress in poverty reduction and shared prosperity
Poverty declined in Moldova . . .
The povertydeclined
Poverty rate significantly declined in Moldova between 2007 and 2014. Over the period,
in Moldova...
the national poverty rate fell from 26.0 percent to 11.4 percent (Figure 7), although the downward
The
trendpoverty rate significantly
stagnated during the declined in Moldova
global financial between
crisis 2007 and
of 2008–09. 4
2014.
This Over the period, the national
is a continuation, albeit at a
poverty rate fell
slower rate, offrom 26.0 percent
the progress madeto 11.4 percent
in the early(Figure
2000s,7),when
although
thethe downward
national trendrate
poverty stagnated
dropped during
from
the global financial crisis of 2008–09.4 This is a continuation, albeit at a slower rate, of the progress made in
68.0early
the to 2000s,
27.0 percent
when the (2000–04), afterrate
national poverty peaking
droppedfollowing
from 68.0 the 1998
to 27.0 crisis
percent involving
(2000–04), afterthe Russian
peaking
Federation.
following theSimilarly,
1998 crisisabsolute
involvingpoverty at theFederation
the Russian World Bank regional
. Similarly, poverty
absolute line of
poverty $5.00
at the purchasing
World Bank
regional
power parity (PPP) U.S. dollars per day almost halved, to 40.7 percent, and absolute poverty40.7
poverty line of $5.00 purchasing power parity (PPP) U.S. dollars per day almost halved, to ($2.50
percent, and absolute poverty ($2.50 PPP a day), at 2.9 percent, was almost eradicated. (See box 1 for technical
PPP a day), at 2.9 percent, was almost eradicated. (See box 1 for technical information on the
information on the calculation of the poverty rate.)
calculation of the poverty rate.)
Figure 7. Poverty headcount ratio, 2007–14
100%
13% 12% 12% 11% 12% 12% 12% 12%
80%
38% 36% 38% 40% 43% 42%
60% 48% 47%
40%
38% 39% 38% 40% 38% 40%
20% 36% 38%
12% 13% 12% 9% 7% 6%
0% 4% 3%
2007 2008 2009 2010 2011 2012 2013 2014
<$2.50 $2.50-$5.00 $5.00-$10 >$10 National pov line

Source: World Bank calculations based on the HBS.
Note: The national poverty rate and the World Bank poverty rate rely on two separate consumption aggregates. The figure relies on national and
regional poverty lines.
3 See World Bank (2016b).
4 The poverty line was set at MDL 104.67 per equivalent adult per month in 2014.
15
4 The poverty line was set at MDL 104.67 per equivalent adult per month in 2014.
3
Box 1. National Poverty Measurement Methodology

Poverty in Moldova is measured using a basic needs approach and relies on consumption expenditure as
an indicator of living standards. Consumption is the preferred welfare indicator because it is more accurately
measured and less exposed to misreporting. To provide better comparability across the country, the
consumption aggregate is modified in several ways, as follows:
• Expenditures for durables and rent are excluded from the aggregate because there is not sufficient
data to estimate correctly the stream of services from durables and imputed rent for the owners of
housing.
• The differences in energy tariffs are considered, and these price distortions are corrected to account for
the actual benefit that the household receives.
• Nominal expenditure has been adjusted for inflation as well as for regional price differences through a
Paasche price index constructed using data collected in the survey and information from the official
consumer price index.
• To capture the economies of scale within the same households, equivalence scales have been adopted.
The former scale of the Organisation for Economic Co-operation and Development is used: 1 for the
first household member, 0.7 for any other adult, and 0.5 for children ages below 15.
The poverty line is set using cost of basic need methods. The food poverty line is set to meet the minimum
energy requirement of 2,282 calories per day per average person, which corresponds to 3,004 calories per
day per adult equivalent. The structure of the food bundle is taken directly from the survey and corresponds
to the actual set of consumed food by the groups in the HBS from the second to the fourth deciles. The
nonfood component of poverty lines is calculated as the share of nonfood expenditures of households the
total expenditures of which are equal to the food poverty line. A standard set of poverty measures proposed
by Foster, Greer, and Thorbecke (1984) is used to determine the poverty rate.
The poverty methodology has deteriorated for various reasons. First, the sampling frame is outdated
because the 2004 census continues to be used. The results of the 2014 census have not yet been released.
This is an important consideration, given the large changes the country has experienced in the past decade,
including migration. The poverty line also needs to be updated to reflect changes in consumption patterns,
particularly because poverty has declined. Efforts to carry out this updating are under way at the NBS.
Finally, there is high nonresponse at the national level, at 34 percent by December 2013, and response rates
declined by 2.6 percent between 2006 and 2013. This is driven by refusal rates, which peaked in October
2010 at 22.3 percent from a baseline of 10.4 percent in January 2006 and stood at 18.1 percent in December
2013. Starting from an already low response rate in 2006, the response rate continues to be extremely low
in urban areas (41 percent), particularly in Chișinău (24 percent), after small but systematic declines. In rural
areas and other regions, the changes are much smaller, and the response levels are higher.
Source: World Bank, based on an NBS note on poverty measurement in September 2007 and an NBS note on
nonresponse analysis.
Poverty has declined throughout the country, but regional disparities persist. In 2007–09, a period of
sharp GDP contraction, the progress in poverty in urban and rural areas diverged. Poverty increased in rural
areas and declined in urban area (Figure 8). In 2010–14, both poverty rates fell by half, and rural poverty
remained at three times the level of urban poverty (16.3 percent and 5.0 percent, respectively). A similar gap
existed between the urban Chișinău, the capital, which accounts for 23 percent of the population, and the
rest of the country. Although the gap has shrunk in the last decade, poverty in other regions is still more than
five times the rate in Chișinău (Figure 9). Poverty rates in the north, center, and south followed similar
trends, although they diverged from the same starting point in 2007.
4
rates in the north, center, and south followed similar trends, although they diverged from the same
rates in the north, center, and south followed similar trends, although they diverged from the same
starting point in 2007.
starting point in 2007. Poverty and Shared Prosperity in Moldova: Progress and Prospects
Figure 8. Poverty rates, by urban and rural areas, % Figure 9. Poverty rates, by region, %
Figure 8. Poverty rates, by urban and rural areas, % Figure 9. Poverty rates, by region, %
40% 40%
40% 40%
30% 31.3% 30.3% 30%
30% 31.3%
25.8% 30.3% 30%
25.8% 21.9% 20%
20% 18.4% 21.9%
20% 16.3% 20%
18.4% 16.3%
10.4% 11.4% 10%
10% 10%
10% 10.4% 11.4%
5.0% 0%
0% 5.0% 0% 2007 2008 2009 2010 2011 2012 2013 2014
0% 2007 2008 2009 2010 2011 2012 2013 2014 2007 2008 2009 2010 2011 2012 2013 2014
2007 2008 2009 2010 2011 2012 2013 2014 Central North
Total Rural Urban Central
South North
Chisinau
Total Rural Urban South Chisinau
Source: World Bank calculations based on the HBS. Source: World Bank calculations based on the HBS.
The depth and severity of poverty in Moldova have also declined in the past decade. Similar
The
The
to the
depth
depth andand
headcount
severity
severity
ratio, the
ofpoverty
of povertypoverty in Moldova
in Moldova
gap and the
have also
have also declined
squared
declined
in the
poverty
in the
past decade.
gap
past
Similar
indicators
to decade. Similar
the headcount
improved in both
ratio,
to thetheheadcount
poverty gapratio,
and the squared
the poverty
poverty gap gap
and indicators
the improved
squared in both
poverty
5 gapurban and rural
indicators areas in 2007–
improved in both
urban
14 and
(Figure 10 rural areas11).
and Figure in 52007–14
This means (Figure and Figure
that the10well-being 11).
of the Thiswith
people
5
means that thebelow
consumption well-being of the
the poverty
urban
people
line,
and
withrural
particularly
areas in 2007–14
consumption
the poorest ofbelow the(also
the poor,
Figure
poverty10 andsignificantly
Figure 11).even
line, particularly
improved
This
the means
poorest
though theof
that
the the
people
well-being
poor, of the
alsoremained
may have improved
people with even
poor.
significantly consumption
though the below the may
people poverty
haveline, particularly
remained poor. the poorest of the poor, also improved
significantly even though the people may have remained poor.
Figure 10. Poverty gap, by urban and rural areas Figure 11. Poverty gap squared, by urban and rural areas
Figure 10. Poverty gap, by urban and rural areas Figure 11. Poverty gap squared, by urban and rural areas
10% 4%
10%
8% 4%
3%
8%
6% 3%
6% 2%
4% 2%
4%
2% 1%
2% 1%
0% 0%
0% 2007 2008 2009 2010 2011 2012 2013 2014 2007 2008 2009 2010 2011 2012 2013 2014
0%
2007 2008 2009 2010 2011 2012 2013 2014 2007 2008 2009 2010 2011 2012 2013 2014
Total Rural Urban Total Rural Urban
Total Rural Urban Total Rural Urban
. . . and the country reduced inequality and boosted shared prosperity
. . . and the country reduced inequality and boosted shared prosperity
... and the
Relatively country
larger reduced
increases inequality
in consumption and
growth boosted
among shared
the less well offprosperity
supported the
Relatively
decline larger increases
in inequality. in consumption
The World Bank goal ofgrowth among
boosting shared the less
prosperity aimswell off supported
to ensure the
that growth
Relatively larger increases in consumption growth among the less well off supported the decline in
decline the
reaches in inequality. TheandWorldmonitored of boosting
Bank goal through shared prosperity aims to ensure
the that growth
inequality. Theless wellBank
World off goal ofisboosting shared prosperity anaimsindicator
to ensurethatthat
measures
growth reaches income
the lessor
reaches
consumption
well theis less
off and wellamong
growth
monitored off and
through is indicator
people
an monitored thatthrough
in the bottom antheindicator
40 percent
measures of theorthat
income measuresdistribution
consumption
consumption the income
growth among in or
a
consumption
people
country in the growth
(thebottom
bottom40 among
percent
40). Inofpeople in theconsumption
the consumption
Moldova, bottom 40 percent
distribution ofamong
the consumption
in a country
growth (thethebottom distribution
40).
bottom In
40Moldova,
outpacedin a
consumption growth
country (the growth among
bottomamong the
40). In bottom 40 outpaced consumption growth among the top 60 percent of the
consumption theMoldova,
top 60 percentconsumption growth among
of the distribution (the top the60)bottom 40 outpaced
in 2007–14 (Figure
distribution (the top 60) in 2007–14 (Figure 12). In 2010, growth rate among the bottom 40 rose slightly,
consumption
12). In
while the2010,
growth
growth
rate among
among
the rate
top 60
the
among top 60 percent
theDuring
declined. bottom the40
of the
restrose
distribution
of theslightly,
(the top
while the rate
period, consumption
60) in 2007–14
among
among the top
the bottom
(Figure
4060
12).top
and In602010,
declined. During
grew growth
in rate
the rest
parallel. aamong
Asof ofthe
thesebottom
the period,
result 40across
consumption
dynamics roseamong
slightly,
the thewhile
groups bottom
captured thein40
rate
theandamong
HBS, top 60thegrew
consumptiontop in60
declined. declined
inequality During (Figure
the rest13).of The
theGini
period, consumption
coefficient, among
for example, the from
declined bottom 400.23
0.3 to andintop 60 grew in
2007–14.
5 The poverty gap is measured as the average distance between the welfare of the poor and the poverty threshold.
5 The poverty gap is measured as the average distance between the welfare of the poor and the poverty threshold.
5 17
The poverty gap is measured as the average distance between the welfare of the poor and the poverty threshold.
17
5
parallel. As a result of these dynamics across the groups captured in the HBS, consumption
parallel.
inequalityAs a result
declined of these
(Figure dynamics
13). The across theforgroups
Gini coefficient, captured
example, in from
declined the 0.3
HBS, consumption
to 0.23 in 2007–
inequality
14. declined (Figure 13). The Gini coefficient, for example, declined from 0.3 to 0.23 in 2007–
Poverty
14. and Shared Prosperity in Moldova: Progress and Prospects
Figure 12. Real consumption per capita growth, Figure 13. Dynamics of consumption per
by group
Figure 12. Real consumption per capita growth, Figure capita inequality
13. Dynamics of consumption per
by10%
group capita
0.32 inequality 4.0
8%
10% 0.32
0.30 4.0
6%
8% 3.5
0.30
0.28
4%
6% 3.5
0.28
0.26 3.0
2%
4%
0.26
0.24 3.0
0%
2%
2008 2009 2010 2011 2012 2013 2014 2.5
-2%
0% 0.24
0.22 Gini (LHS) P90/P10 (RHS) 2.5
-4%
-2% 2008 2009 2010 2011 2012 2013 2014
0.22
0.20 Gini (LHS) P90/P10 (RHS) 2.0
-6%
-4% Total Bottom 40 Top 60 2007 2008 2009 2010 2011 2012 2013 2014
0.20 2.0
Total Bottom 40 Top 60 2007 2008
-6% World Bank calculations
Source: based on the HBS. Source: World Bank 2009 2010 2011
calculations based2012 2013
on the 2014
HBS.
Consumption growth in urban and rural areas among the bottom 40 was higher overall than
Consumption
Consumption
among growth
the more growth in urban
well inoff, and
urban rural
but and areas
withrural amongamong
areas
significant the bottom
the 40
fluctuations. was
Inhigher
bottom overall
40 was
particular, than
higher
the among40
overall
bottom thein
than
more well off, but with significant fluctuations. In particular, the bottom 40 in urban areas faced sharp
amongareas
urban theinfaced
fluctuations more wellfluctuations
sharp
consumption, off,
whilebut with significant
people fluctuations.
in consumption,
progress among while
in ruralprogress
areas wasIn particular,
among
more people
stable. the
inGDP
The bottom
rural areas40was
decline inin
urbanaffected
more
2012 areas faced
stable. The
the sharp
GDP
urban fluctuations
decline
bottom 40 more in
in 2012 consumption,
than affected
people thewhile
in ruralurbanprogress
areas, bottomamong
although people
40 former
the more thaninpeople
rural
benefited moreareas
infromwas
rural
more
the
areas, stable.
increase in The
although theGDP
pensions anddecline
former social in 2012
assistance
benefited more affected
in 2012
from the urban
(Figure 14 andbottom
increase 1540 moreandthan
). Overall,
in pensions
Figure people
consumption
social in rural
growth
assistance in
was greater
areas,(Figure
2012 among
although the
14 the bottom
and former 40 than
Figure 15benefited among
). Overall,more the top 60, helping
from thegrowth
consumption to
increasereduce
was inequality
in greater
pensions in both
and the
among urban
social and rural
assistance
bottom 40 than in
areas.
2012
among (Figure
the top 1460,
andhelping 15).reduce
Figure to Overall, consumption
inequality in bothgrowth was rural
urban and greater among the bottom 40 than
areas.
among the top 60, helping to reduce inequality in both urban and rural areas.
Figure 14. Real consumption growth, urban areas Figure 15. Real consumption growth, rural areas
Figure
12% 14. Real consumption growth, urban areas Figure
10% 15. Real consumption growth, rural areas
12%
10% 10%
8%
10%
8% 8%
6%
8%
6% 6%
4%
6% 4%
2%
4%
4% 2%
0%
2%
0% 2008 2009 2010 2011 2012 2013 2014
2% -2%
0% 2008 2009 2010 2011 2012 2013 2014
2008 2009 2010 2011 2012 2013 2014 -2%
-4%
0%
-2%
2008 2009 2010 2011 2012 2013 2014 -4%
-6%
-2%
-4% Total Bottom 40 Top 60
Total Bottom 40 Top 60 -6%
-8%
-4% Total Bottom 40 Top 60
Source: World BankTotal Bottom
calculations based on 40
the HBS. Top 60 -8% World Bank calculations based on the HBS.
Source:
Overall
Overallprogress
progress in in
shared prosperity
shared was remarkable
prosperity in Moldova
was remarkable relative torelative
in Moldova other countries
to otherincountries
Europe
and
in Central
Overall
Europe Asia.Central
progress
and Moldova wasprosperity
in shared
Asia. among
Moldova thewas
leaders
was in the
theshared
remarkable
among prosperity
in Moldova
leaders indicator
relative
in the shared in other
to the region
prosperity (realin
countries
indicator
annualized growth was close to 5 percent in 2008–13), although the total growth in consumption was much
in Europe
the region
slower (belowand
(real Central(Figure
2 percent) Asia.
annualized Moldova
growth was
16).6 As
was among
close
a result, the gap
to 5positive
the percentleaders in the
inbetween
2008–13),theshared
growthprosperity
althoughof the totalindicator
the bottom 40 andin
growth
the total
the region (real annualized
population growthinwas
was the highest close together
Moldova, to 5 percent in 2008–13),
with the although the total growth in
Kyrgyz Republic.
18
18
6 The bottom 40 in the region is defined based on a harmonized consumption aggregate, which is different from the consumption aggregate
used in Moldova. As a result, the growth rate of the bottom 40 here may be different from the rate in the rest of the analysis.
6
consumption was much slower (below 2 percent) (Figure 16).6 As a result, the positive gap between
consumption
the growth of was much slower
the bottom 40 and(below 2 percent)
the total (Figure
population was16 ).6 highest
the As a result, the positive
in Moldova, gap between
together with the
the growth of the
Kyrgyz Republic. bottom 40 and the Poverty
total and Shared
population was Prosperity
the in
highest Moldova:
in Progress
Moldova, and
together Prospects
with the
Kyrgyz Republic.
Figure 16. Real consumption growth, the bottom 40 and total population, by country
Figure
10% 16. Real consumption growth, the bottom 40 and total population, by country
10%
8%
10% Bottom 40% Total Population
6%
8%
4%
6%
2%
4%
4%0%
2%
-2%
2%0%
-4%
-2%
0%
-6%
-4%
-2%
-8%
-6%
-4%
-10%
-8%
4) …
(2007-…
-6%
Bosnia&Herzegovina
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2009-2014)
(2007-2012)
(2009-2014)
-10%
(2007-2012)
(2009-2013)
(200.7-2012)
(2007-2012)
(2009-2014)
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2008-2012)
(2007-2012)
(2008-2013)
(2012-2014)
(2008-2013)
(2009-2013)
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2009-2014)
(2009-2014)
(2007-2012)
(2009-2014)
(2009-2014)
Croatia (2009-2012)
(2007-2012)
Montenegro (2009-2014)
(2007-2012)
(2007-2012)
Lithuania (2007-2012)
(2008-2013)
Albania (2008-2012)
(2007-2012)
(2009-2014)
Bulgaria (2007-2012)
(2007-2012)
Romania (200.7-2012)
Turkey (2008-2013)
(2012-2014)
Ukraine (2009-2014)
(2009-2014)
Moldova (2009-2014)
(2009-2013)
(2007-2012)
Russian Federation (2007-2012)
Kazakhstan (2009-2013)
4)
…
(2007-…
Kyrgyz Republic (2009-201
(2009-201
Bosnia&Herzegovina
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2009-2014)
(2009-2014)
(2007-2012)
(2007-2012)
(2007-2012)
(2009-2013)
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2007-2012)
(2008-2012)
(2007-2012)
(2007-2012)
(200.7-2012)
(2009-2014)
(2008-2013)
(2008-2013)
(2012-2014)
(2007-2012)
(2007-2012)
(2009-2013)
(2007-2012)
(2007-2012)
(2009-2014)
(2007-2012)
(2009-2014)
(2009-2014)
(2009-2014)
Bosnia&Herzegovina
(2007-2011)
Federation
Federation
Tajikistan
Poland
Belarus
Serbia
Hungary
Georgia
Latvia
Estonia
Republic
Armenia
Macedonia, FYR
Slovenia
Kazakhstan
Montenegro
Albania
Armenia
Estonia
Denmark
Poland
Lithuania
Ireland
Netherlands
Georgia
Greece
Spain
France
Finland
Moldova
ItalyItaly
Slovenia
Latvia
Kingdom
Austria
Bulgaria
Tajikistan
Republic
FYR
Portugal
Hungary
Belgium
Sweden
Turkey
Ukraine
Serbia
Republic
Republic
Belarus
Romania
Montenegro
Kazakhstan
Albania
Armenia
Estonia
Lithuania
Denmark
Poland
Ireland
Netherlands
Greece
Georgia
Spain
France
Finland
Moldova
Slovenia
Latvia
Kingdom
Austria
Bulgaria
Tajikistan
Portugal
Republic
Hungary
Belgium
FYR
Sweden
Serbia
Turkey
Ukraine
Republic
Republic
Belarus
Romania
Slovak
Macedonia,
Russian
Macedonia,
Russian
Slovak
Czech
Kyrgyz
United
Slovak
Czech
Kyrgyz
United
Washington,
Source: DC. database harmonization as of April 2016, Europe and Central Asia Team for Statistical Development, World Bank,
ECAPOV
Washington, DC.
Progress was underpinned by high upward economic mobility
Progress
Progress was
was underpinned
underpinned byupward
by high high upward economic
economic mobility mobility
Moldova presented one of the highest levels of upward economic mobility across the region
Moldova
over
Moldova presented
the presented
past decade.one
one of
thethe
ofPrior tohighest levels
thelevels
highest global of upward
economic
of upward economic
crisis,
economic upward mobility
mobilitymobilityacross theover
in region
across the Moldova region
was
the
over the
impressive: past
past decade.25 Priordecade. Prior
to the global
percent to
of theeconomicthe
populationglobal
crisis, economic
upward
moved crisis,
outmobility upward
in Moldova
of extreme, mobility in
was impressive:
$2.50-a-day Moldova
poverty 25 was
percent
(Figure of
17).
impressive:
the population 25 percent
moved outof
of the population
extreme, moved
$2.50-a-day out
poverty of extreme,
(Figure 17). $2.50-a-day
The country poverty
experienced
The country experienced a dynamic process of high upward economic mobility and little churning (Figure
a 17).
dynamic
process
The of highexperienced
country upward economic mobility
a dynamic and littlehigh
churning 7 (thateconomic
is, contemporary movements
and little in and out
(that is, contemporary
of poverty). 7 movements in process
and out of upward
of poverty). mobility churning
(that is, contemporary movements in and out of poverty).7
Figure 17. Households in poverty that escaped poverty or the nonpoor who fell into poverty, %
Figure
40%
17. Households in poverty that escaped poverty or the nonpoor who fell into poverty, %
early time period (circa 2001 to 2008) late time period (circa 2008 to 2010)
40%
30% early time period (circa 2001 to 2008) late time period (circa 2008 to 2010)
30%
20%
20%
10%
10%
0%
0%
KAZ
UKR
ALB
MNE
POL
MKD
HUN
KAZ
POL
UKR
MNE
MDA
ROU
ARM
BLR
TUR
GEO
RUS
LTU
SRB
SVK
MDA
TUR
GEO
ROU
ARM
BLR
SRB
RUS
SVK
-10%
KAZ
UKR
ALB
MNE
POL
MKD
HUN
KAZ
POL
UKR
MNE
MDA
ROU
ARM
BLR
TUR
GEO
RUS
LTU
SRB
SVK
MDA
TUR
GEO
ROU
ARM
BLR
SRB
RUS
SVK
-10%
-20%
-20% upwards mobility, share 2.5 USDline downwards mobility, share 2.5 USDline
upwards mobility, share 2.5 USDline downwards mobility, share 2.5 USDline
Source: Cancho et al. 2015, using World Bank estimates based on ECAPOV database harmonization as of February 2014, Europe and
6Central Asia Team40
The bottom forin
Statistical Development,
the region Worldbased
is defined Bank, Washington,
on a harmonizedDC. consumption aggregate, which is different from the
Note: Based on a linear probability model with the dependent variable equal to 1 if the household experienced upward mobility (cross
consumption
6 The bottomaggregate
40 in the used
regionin Moldova.
is defined As a
basedresult,
on a the growth
harmonized rate
any threshold) and zero otherwise. Significance evaluated at the 10 percent level. See of source
the bottom
consumption
the for40more
hereinformation
aggregate,
paper may be
which different
is different
on the from the
rate in the rest
consumption
methodology. The of the Bank
aggregate
World analysis.
used in Moldova.
regional $2.50-a-day As a result,
poverty the growth rate of the bottom 40 here may be different from
line is used. the
7 Dávalos
rate
After theand
in the rest Meyer (2015).
of the the
crisis, analysis.
rate of upward mobility continued to rise: a large share of poor
7 Dávalos and Meyer (2015).
households were able to improve their living standards and escape poverty, while few
19
nonpoor households fell into poverty. The share of 19people who remained poor at the national
poverty line was low (3 percent), while the share of those who moved out of poverty was higher
than the share of those who fell into poverty. The same dynamics can be observed for the regional
7 Dávalos and Meyer (2015).
poverty lines of $2.50 and $5.00 a day, although churning is more common at the higher poverty
lines (Figure 18). However, many households in Moldova remain 7 vulnerable to shocks and thus to
falling into poverty. In particular, 9 percent of the 2007 nonpoor (defined according to the national
poverty line) were poor by 2014, when the consumption of 21 percent of the population was below
Note: Based on a linear probability model with the dependent variable equal to 1 if the household experienced upward mobility (cross
any threshold) and zero otherwise. Significance evaluated at the 10 percent level. See the source paper for more information on the
methodology. The World Bank regional $2.50-a-day poverty line is used.
After the crisis, the rate of upward mobility continued to rise: a large share of poor
households were able to improve their living standards and escape poverty, while few
nonpoor
After households
the crisis, fell
the rate of into poverty.
upward The sharetoofrise:
mobility continued people who
a large remained
share poor at thewere
of poor households national
able
to improve
poverty linetheir
wasliving
low (3standards
percent),and escape
while the poverty,
share ofwhile
thosefewwho nonpoor
movedhouseholds fell into
out of poverty waspoverty.
higher
The share of people who remained poor at the national poverty line was low (3 percent), while the share of
than the share of those who fell into poverty. The same dynamics can be observed for the regional
those who moved out of poverty was higher than the share of those who fell into poverty. The same dynamics
poverty
can lines offor$2.50
be observed and $5.00
the regional a day,
poverty although
lines of $2.50 churning
and $5.00 is more
a day, common
although at theishigher
churning poverty
more common
lines
at the (Figure 18). However,
higher poverty many
lines (Figure 18).households in Moldova
However, many remain
households vulnerable
in Moldova remain to vulnerable
shocks andtothus to
shocks
and thus
falling to poverty.
into falling into
In poverty. In 9particular,
particular, percent of9 percent
the 2007of nonpoor
the 2007 (defined
nonpoor according
(defined according to the
to the national
national
poverty poverty
line) wereline) werebypoor
poor by 2014,
2014, whenwhen the consumption
the consumption of 21
of 21 percent
percent ofofthethepopulation
populationwas
was below
below
$5.00 a day (the regional poverty line).
$5.00 a day (the regional poverty line).
Figure 18. Intragenerational mobility, by share of the population, Moldova, 2007–14
9
28 8
68 21
88
83
32
9
21 2 19
3 10
National line $2.50 $5.00 $10
Stayers Upward mobility Downward mobility Never poor

Note: The data are calculated according to the regional poverty lines (2005 PPP) and refer to the lower-bound mobility estimates
following the Dang et al. (2011) synthetic panel methodology. See Cancho et al. (2015) for more information on the methodology.
Yet, Moldova is one of the poorest countries in Europe

Yet, Moldova
Moldova is amongis
theone of the
countries poorest
with countries
the highest ininEurope
poverty rates Europe and Central Asia
and the poorest in Europe. Its moderate $5.00-a-day poverty rate is lower than other countries in
Moldova
the regionis at
among
similartheGDP,
countries
but iswith the highest
among poverty
the highest rates
in the in Europe
region, and Central
40 percent in 2013Asia and 19
(Figure the).
poorest in Europe. Its moderate $5.00-a-day poverty rate is lower than other countries in the region at
BecauseGDP,
similar it isbut
lessis unequal
among thethan other
highest countries
in the in percent
region, 40 the region, Moldova
in 2013 (Figurehad
19). aBecause
relatively
it islow
less extreme
unequal
$2.50-a-day
than poverty inrate,
other countries 6.0 percent,
the region, Moldova in had
2012 and a small
a relatively middle $2.50-a-day
low extreme class (above $10.00-a-day
poverty rate, 6.0
percent, in 201211.7
consumption), and apercent.
small middle class (above
Nonetheless, $10.00-a-day
a large share of consumption), 11.7 percent.
the population—41.9 Nonetheless,
percent in 2012—a
large share of the
was concentrated population—41.9
among the vulnerablepercent in 2012—wasconsumption)
($5.00–$10.00-a-day concentrated(Figure
among 20).the vulnerable
($5.00–$10.00-a-day consumption) (Figure 20).
20
8
Figure 19. GDP per capita and $5.00-a-day poverty, Europe and Central Asia, latest available data
30,000 GDP per capita (left axis) Poverty rate (right axis) 90
Poverty rate (5 USD 2005 PPP)

GDP per capita (2011 PPP)
80
25,000
70
20,000 60
50
15,000
40
10,000 30
20
5,000
10
- 0
Kosovo
Lithuania
Moldova
Malta
Kyrgyz Republic
Romania
Hungary
Ukraine
Latvia
Armenia
Montenegro
Belarus
Estonia
Georgia
Albania
Croatia
Kazakhstan
Poland
Greece
Portugal
Slovenia
Czech Republic
Turkey
Slovak Republic
Serbia
Russian Federation
Tajikistan
Bulgaria
Macedonia, FYR
Sources: ECAPOV database harmonization as of April 2016, Europe and Central Asia Team for Statistical Development, World
Bank, Washington, DC; World Development Indicators database, World Bank.
Figure 20. Welfare group decomposition, by country, latest available data

Belarus
Slovenia
Ukraine
Czech Republic
Hungary
Kazakhstan
Slovak Republic
Russia
Poland
Montenegro
Serbia
Lithuania
Estonia
Croatia
Moldova
Latvia
Turkey
Bulgaria
Albania
Romania
Macedonia FYR
Armenia
Kosovo
Kyrgyz Republic
Georgia
0 10 20 30 40 50 60 70 80 90 100
Extreme poor (below US$2.50 PPP) Poor (between US$2.50-5 PPP)

Vulnerable (between US$5-10 PPP) Middle Class (above US$10 PPP)
Washington, DC.
21 9
What drove poverty
3. reduction and shared

prosperity?
What drove poverty reduction and shared prosperity?
Given the progress in reducing poverty and boosting shared prosperity, this section seeks to identify
the drivers
Given of progress.
the progress It focuses
in reducing on and
poverty resolving whether
boosting sharedeconomic growth
prosperity, was pro-poor
this section and which
seeks to identify the
drivers
sourcesof progress. It focuses on income,
of income—labor resolving whether economic growth
public transfers, was pro-poor and which
or remittances—drove the sources
positiveof
income—labor income, public transfers, or remittances—drove the positive performance.
performance.
Economic growth was volatile, but positive and pro-poor overall
Economic growth was volatile, but positive and pro-poor overall
Economic growth in Moldova has been mostly consumption driven. Fueled by remittances, private
Economic growth in Moldova has been mostly consumption driven. Fueled by remittances,
consumption contributed as much as 7 percentage points to GDP growth in 1999–2008, that is, prior to the
private consumption
economic crisis, and is contributed as muchthan
a larger contributor as 7exports
percentage points
(Figure 21).8 to GDP growth in 1999–2008, that
is, prior to the economic crisis, and is a larger contributor than exports Figure 1).1
Figure 21. GDP growth decomposition
20
10
Percent
0
1996-1998 1999-2008 2009-2014 Average
-10
-20 Private Consumption Public Consumption Fixed Investments

Change in stocks Exports Imports
Sources: World Bank 2016b; World Bank calculations based on national accounts.
Given the large contribution of private consumption to GDP, GDP growth was closely mirrored by both
household income and consumption growth. Household income and consumption trends followed the
GivenGDP
overall the trend
largeclosely
contribution
(Figure 22).of privatethis
However, consumption to GDP,suffered
also means households GDP from
growth was closely
the volatility in the
mirroredThe
economy. bytwoboth household
downturns income
as a result of theand consumption
global growth.
economic crisis and theHousehold income
drought, in 2009 and,
and 2012
respectively, drove down household welfare growth . In 2009, households were able to smooth
consumption trends followed the overall GDP trend closely (Figure 2). However, this also means consumption
even as income
households fell sharply.
suffered from the volatility in the economy. The two downturns as a result of the global
economic crisis and the drought, in 2009 and 2012, respectively, drove down household welfare
growth. In 2009, households were able to smooth consumption even as income fell sharply.
8 See World Bank (2016b).
10
Figure 22. GDP and household income and consumption growth

10%
5%
0%
2008 2009 2010 2011 2012 2013 2014
-5%
Figure 22. GDP and household income
GDP per capita and consumption
growth growth Consumption growth
Income growth
-10%
10%
Source: World Bank calculations based on data of the World Development Indicators database and the HBS.
Consumption
5% growth was pro-poor, and changes in the distribution thus contributed more than the
growth in average consumption to the decline in poverty rates. From 2007 to 2014, consumption growth
was positive
0% 23. overall,
Figure Growthbut average consumption
incidence curve, amongFigure
the bottom 20 percent of the
24. Datt-Ravallion distribution (the
decomposition bottom 20)
of changes
grew by more than 10 percent,
2008 2007–142009
total population, surpassing the
2010growth rate among higher
2011decline in 2012
in the consumption
the poverty rate2013groups ( 201423). This
Figure
positive, pro-poor growth led to progress in poverty reduction, which was therefore driven by changes in both
-5%
mean growth and redistribution. According to the Datt-Ravallion (1992) decomposition, changes
2007-2008 -2.0 in
2.6distribution
led, overall, to the povertyGDPdecline
perin 2007–14,
capita growthexcept for two 2008-2009
Income brief periods, inConsumption
growth 2008–09 and 2012–13
growth -1.41.3 (Figure 24).
In -10%
2009–10, after the global financial crisis, the 4 percentage point decline in poverty -4.0
2009-2010 can-0.4 be almost fully
Source: World Bank calculations based on data of the World Development Indicators
2010-2011 database and the
explained by changes in distribution. In 2013–14, poverty would have increased, given the decline in HBS.-2.3 -2.1
consumption growth, had it not been for distribution effects.2011-2012 The distribution effects were relatively -1.1
0.2
stronger in
2012-2013 -0.9 -3.0
both urban and rural areas. 2013-2014 -2.4 1.1
2007-2014 (Total) -11.1 -3.3
Figure 23. Growth incidence curve, Figure
2007-201424. Datt-Ravallion
(Rural) -11.6 decomposition
-3.4 of changes
total population, 2007–14 in the decline
2007-2014 (Urban) in the poverty
-10.8 rate -2.6
10 2007-2008 Growth Distribution -2.0 2.6

Source: World Bank calculations based on the HBS. 2008-2009
Source: World Bank calculations based on the HBS. -1.41.3
8
2009-2010 -4.0 -0.4
(%)%
rate
Labor markets aided the progress mainly by nonagricultural wage increases

6 2010-2011 -2.3 -2.1
growthrates
4 2011-2012 -1.1
0.2
Annualizeed growth
Domestic
2
labor income growth contributed to income growth among the bottom 40 and to
2012-2013 -0.9 -3.0
Annualized
poverty reduction. Overall, because of a lack of job2013-2014 creation and rising inactivity-2.4 1.1
rates, the
0 2007-2014 (Total) -11.1 -3.3
contribution
-2
of labor income was driven by the2007-2014
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97
nonagricultural
(Rural) sector mostly through
-11.6 -3.4 wage
increases (Figure 5 and Figure 6). Before the economic crisis, the faster growth
2007-2014 (Urban) -10.8 of nonagricultural
-2.6
-4
earnings relative to agricultural earnings placed many agricultural workers into the bottom 40. After
Consumption per capita percentiles
Consumption per capita percentiles
Growth Distribution
the crisis, agricultural employment and earnings picked up, but this contributed little. Agricultural
income was subject to fluctuations over the period, which undermined its contribution to welfare
improvements (see below).
Labor markets aided the progress mainly by nonagricultural wage increases
Labor markets aided the progress
Domestic labor income growth contributed to income growth among the bottom 40 and to
mainly by nonagricultural wage increases
poverty reduction. Overall, because of a lack of job creation and rising inactivity rates, the
contribution
Domestic laborofincome
labor growth
income contributed
was driventobyincome
the nonagricultural
growth among sector mostly
the bottom through
40 and wage
to poverty
increases (Figure
reduction. Overall,5because
and Figure 6). Before
of a lack the economic
of job creation crisis,
and rising the faster
inactivity growth
rates, of nonagricultural
the contribution of labor
income was driven by the nonagricultural sector mostly through wage increases (Figure 25
earnings relative to agricultural earnings placed many agricultural workers into the bottom 40. After and Figure 26).
Before the economic
the crisis, agriculturalcrisis, the faster growth
employment of nonagricultural
and earnings earnings
picked up, but relative to agricultural
this contributed earnings
little. Agricultural
placed many agricultural workers into the bottom 40.2 After the crisis, agricultural employment and earnings
income
picked up,was
but subject to fluctuations
this contributed over the period,
little. Agricultural income which undermined
was subject its contribution
to fluctuations to welfare
over the period, which
improvements
undermined (see below).to welfare improvements (see below).
its contribution
11
Figure
Figure25.
25.Decomposition
Decompositionof ofincome
incomegrowth,
growth, Figure
Figure26.
26.Decomposition
Decompositionof ofchanges
changesininpoverty,
poverty,by
by
the income source, 2007–14, % points
the bottom 40, by income source, 2007–14,%
bottom
8%
40, by income source, 2007–14, % income source, 2007–14, % points
8% 2007-2010 2010-2014 4
2007-2010 2010-2014 4
6% 3 2007-2010 2010-2014
6% 3 2007-2010 2010-2014
2
2
4% 1
4% 1
2% 0
2% 0
Other
Pensions
employment
earnings
assistance
employment
Remittances
earnings
-1
Other
Pensions
employment
Non-agriearnings
Socialassistance
Agriemployment
Remittances
Agriearnings
Non-agri
-1
Non-agri
0% -2
0% -2
employment
assistance
Other
Pensions
Remittances
employment
earnings
earnings
employment
Socialassistance
Other
Pensions
Remittances
Agriemployment
Non-agriearnings
Agriearnings
-3
Non-agri
-2% -3
Non-agri
Non-agri
Agri
-2%
Social
-4
-4
Agri
-4% -5
Non-agri
-4%
Agri
-5
Social
-6
Agri
-6% -6
-6%
The inactivity
The inactivity
inactivity rate rate rose
rosebyby
raterose by1919 19 percentage
percentage points
points in
in 2000–14,
2000–14, driving
driving the decline in
The percentage points in 2000–14, driving thethe decline
decline in
in employment
employment
employment rates. The
rates.inThe decline
decline in labor force participation is explained by international migration
rates. The decline labor force in labor force participation
participation is explained
9
isbyexplained by international
international migrationmigration
and the associated
and the
reduction associated
and the associated
in informalreduction
reduction in informal
in informal In
employment. 9 employment.
employment. 9In 2014, for example, 20 percent of inactive
In 2014, for
2014, for example, 20example,
percent 20 of percent
inactiveofmen inactive
were abroad
men
men were
searching
were forabroad
jobssearching
abroad or working
searching for jobs
jobs or
for(Figure working
or 27). Early
working (Figure 27).
retirement
(Figure 27). Early retirement
was another
Early retirement was
was another
factor another factor
contributing factorto the high
contributing
inactivity
contributing to
tothe
rate. In high
the highinactivity
2014, among rate.
inactivity rate.In
In2014,
inactive menamong
2014, and women
among inactive
inactiveinmentheand
men women
15–65
and women ininthe
age-group,the15–65 age-
39 percent
15–65 age- and 47
group,
percent 39 percent and 47 percent were pensioners, respectively. The sharp increase
group, 39 percent and 47 percent were pensioners, respectively. The sharp increase in the inactivity ages 57
were pensioners, respectively. The sharp increase in the inactivity ratein the inactivity
among people
rate
rate among
and above
amongwas people
people ages
higher 57
57 and
agesthan andinabove
above was
previous was higher
years; than
than inthan
highermore in previous years;
years; more
60 percent
previous of than
people
more thanages60
60 percent
60 andof
percent ofabove were
people ages 60 and above were inactive. Among women, family responsibilities is an important Of equal
inactive.
people 10
ages Among
60 and women,
above were family responsibilities
inactive. 10
10 Among women, is an important
family reason
responsibilities behind
is an inactivity.
important
concern
reason is the prevalence of underemployment, especially among those who are self-employed and
reasonbehind
behindinactivity.
inactivity.OfOfequal
equalconcern
concernisisthetheprevalence
prevalenceof ofunderemployment,
underemployment,especiallyespeciallyamong
among
those
those who work in rural areas or agriculture. This points to the possibly lower quality of jobs in these
those who
who are are self-employed
self-employed and and those
those who
who work
work inin rural
rural areas
areas oror agriculture.
agriculture. This
This points
points toto the
the
areas
possibly(Figure
lower 28).
quality of jobs in these areas (Figure 28).
possibly lower quality of jobs in these areas (Figure 28).
Figure
Figure27.
27.Reason
Reasonfor
forunemployment
unemploymentor
orinactivity,
inactivity, Figure
Figure28.
28.Underemployment
Underemploymentamong
amongthe
theemployed
employed
15–65 age-group, 2014
15–65 age-group, 2014 ages 15+, 2014
ages 15+, 2014
6% 6% 70
70
6% 20% 60
20%
20% 60
47% 50
50
47%
47% 40
39% 40
39% 30
30
39% 20
22% 20
22%
1% 10
10
22% 1%
25%1% 00
18%
18% 25%
25%
Female 18% Male
Female Male
Education Female p Male
Familyy responsibilities
Disease
Edcuation Pensioner
Family responsibilities
Edcuation Family responsibilities %%working
workingless
lessthan
than40
40hours/week
hours/week
Voluntary inactive
Disease Abroad for work
Pensioner
Disease
Off season agriculture Other
Pensioner %%wishing
wishing to work morehours
to work more hours
Voluntary
Voluntaryinactive
inactive Abroad for work
Abroad for work
Source: World Bank 2016, using estimates based on LFS data. Source: Ronnås 2015, based on LFS data.
Source: World Bank 2016, using estimates based on LFS data. Source: Ronnås 2015, based on LFS data.
9See World Bank (2014). In Moldovan labor force statistics, people who are working or searching for work abroad are
9
See World Bank (2014). In Moldovan labor force statistics, people who are working or searching for work abroad are
Among
considered
considered
those
inactive.who work, the less well-off experienced an increasingly lower-quality labor market
inactive.
engagement. Being less well educated, the bottom 40 and the poor had fewer opportunities and less favorable
10 World Bank (2016c).
outcomes in the labor market. The structure of employment was quite different for people at the top and the
24
24 the employment and unemployment rates were close in
bottom of the distribution, although, in aggregate,
the two groups. The bottom 40 and poor households were employed less often and self-employed more
often, especially in the agricultural sector, which usually provides lower-quality jobs (Figure 29 and Figure
9 See World Bank (2014). In Moldovan labor force statistics, people who are working or searching for work abroad are considered inactive.
12
employment and unemployment rates were close in the two groups. The bottom 40 and poor
households were employed less often and self-employed more often, especially in the agricultural
sector, which usually provides lower-quality jobs (Figure 29 and Figure 30). Overall, the increase in
self-employment among the adult population Poverty and Shared
was alarming Prosperity
because in Moldova:
this signaled greater Progress and Prospects
informality.
This may have partly derived from the rigid labor market regulations in Moldova, which impose
30). Overall,
strong the increase
restrictions in self-employment
on dismissal among the
and high overtime adult population
premiums. Progress was alarming
is being made because this signaled
by the
greater informality.
government, however, in aligning the labor code with European Union (EU) regulations.
Figure 29. Employment status of the poor Figure 30. Employment status of the bottom 40
60% 60%
18% 21% 17% 19%

40% 40% 22% 25%
22% 25%
20% 38% 36% 20% 39% 40%

26% 24% 29% 28%
0% 0%
Non-poor Poor Non-poor Poor T60 B40 T60 B40
2007 2014 2007 2014
Employee Self-employed Employee Self-employed
There is a lack of employment opportunities in nonfarm sectors, especially in rural areas.

There is a lack of employment opportunities in nonfarm sectors, especially in rural areas. Although
Although the majority of the population lives in rural areas, most manufacturing and investment
the majority of the population lives in rural areas, most manufacturing and investment activities take
activities
place taketwo
in the place in cities,
large the two large
Bălți andcities, Bălți (Figure
Chișinău and Chișinău (Figure
31). The 31). The concentration
concentration of
of economic development
economic
in development
the capital may serveintothe capital may
perpetuate theserve to perpetuate
competitive the competitive
gap between firms in gap betweenand
the capital firms in elsewhere
firms
the capital
and representand afirms elsewhere
constraint on and
the represent
development a constraint on the development
of nonagricultural economic of activities
nonagricultural
outside the big
cities.
economicThe activities
lack of economic
outside the diversification
big cities. Thein rural
lack ofareas, combined
economic with poorinaccess
diversification rural to jobs in urban
areas,
areas,
combinedhas with
led to twoaccess
poor important
to jobstrends.
in urbanOne is has
areas, the led
high and important
to two rising ratetrends.
of migration
One is the from
highrural areas
(Figure
and rising32).
rateOfofparticular
migration concern
from ruralis areas
the migration
(Figure 32). of Of
rural youth. concern
particular Aroundis23.6 the percent
migrationofofrural youth
ages 15–24 are working abroad, compared with only 15.7 percent in the domestic
rural youth. Around 23.6 percent of rural youth ages 15–24 are working abroad, compared with only economy, which points
to a lack
15.7 of attractive
percent in theemployment opportunities
domestic economy, whichamong pointsyoung
to a people
lack of in rural areas.employment
attractive
11
The other important
trend is a return to subsistence farming (see below11).
opportunities among young people in rural areas. The other important trend is a return to
subsistence farming (see below).
Figure 31. Population distribution, manufacturing Figure 32. Share of employment abroad in total
and investment, by location, 2014 employment, %
100% 30
80% 25
20
60%
11 Ronnås (2015). 15
40%
10
20% 25 5 All areas Rural Urban
0% 0
Population Manufacturing Investments
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
production
Chisinau + Balti Rest of Moldova
Source: Ronnås 2015, based on NBS data. Source: Ronnås 2015, based on LFS data.
Note: Investments refer to investments in long-term tangible
assets (active material).
Therehas
There hasbeenbeena alarge large shift
shift in in employment
employment outout of agriculture,
of agriculture, whichwhich is not
is not reflected
reflected in
in increases in
increases
other sectors;in other
rather,sectors; rather,
subsistence subsistence
farming farmingSince
is expanding. is expanding.
2006, the shareSinceof2006,
workersthe in
share of
agriculture has
declined
workers in from 34 to 30has
agriculture percent,
declined partly
frombecause
34 to 30 of emigration
percent, partly among working-age
because of emigrationpeopleamong
in rural areas
(Figure 33). 12
Employment in other sectors has12 been declining, with the exception of trade and transport,
working-age people in rural areas (Figure 33). Employment in other sectors has been declining,
with the exception of trade and transport, which expanded only slightly (Figure 34). In contrast, the
11 Ronnås (2015).
share
12 of people
Employment working
in agriculture hasin low-intensity
experienced agriculture
a rebound (lessasthan
since 2012, partly a result20 hours
of new a week)
investment in thehas been
sector sincerising
2007, but it is
unclear if this rebound will be sustainable.
steadily, from 13 percent to 24 percent. This agricultural work is often conducted by the owners of
the plots and, so, is not officially considered employment. 13Without formal employment, there is a
risk these part-time agricultural workers will not be eligible for pensions and the associated benefits.
There has been a large shift in employment out of agriculture, which is not reflected in
increases in other sectors; rather, subsistence farming is expanding. Since 2006, the share of
workers in agriculture has declined from 34 to 30 percent, partly because of emigration among
working-age people in rural areas (Figure 33).12 Employment in other sectors has been declining,
with the
which exception
expanded of slightly
only trade and transport,
(Figure which
34). In expanded
contrast, onlyofslightly
the share people(Figure
working 34). In contrast, the
in low-intensity agriculture
share of people working in low-intensity agriculture (less than 20 hours a week) has been rising
(less than 20 hours a week) has been rising steadily, from 13 percent to 24 percent. This agricultural work is
steadily,
often from 13 by
conducted percent to 24 percent.
the owners Thisand,
of the plots agricultural
so, is notwork is often
officially conducted
considered by the owners
employment. of formal
Without
employment,
the plots and, there
so, is isnot
a risk theseconsidered
officially part-time agricultural
employment.workers
Withoutwill not be
formal eligible forthere
employment, pensions
is a and the
associated benefits.
risk these part-time agricultural workers will not be eligible for pensions and the associated benefits.
Figure 33. Employment in agriculture Figure 34. Employed populations, by sector
35% 1200
Employed people (000s)

1000
30% 800
25% 600
400
20%
200
15% 0
% of employment 2006 2007 2008 2009 2010 2011 2012 2013 2014
10%
Agriculture, forestry; Fishery
5% % people working less than 20 Industry
hours Construction
0% Trade; Hotels and restaurants
Transportation, Communications
2006 2007 2008 2009 2010 2011 2012 2013 2014 Public administration; Education; Health and social work
Other
Source: World Bank calculations based on NBS and LFS data. Source: NBS data.
The poor and the bottom 40 are more likely to be employed in agriculture than in services;
The
of thepoor and 40
bottom thearebottom
employed 40inare
the more likelysector
agricultural to be(Figure
employed35 and in Figure
agriculture
36). thanthe
Given inhigh
services; this
this concentration
concentration has increased in recent years. Almost 80 percent of the poor
has increased in recent years. Almost 80 percent of the poor and 70 percent of the bottom and 70 percent
informality in agriculture relative to other sectors, this dependence on agricultural employment
40 are employed in the agricultural sector (Figure 35 and Figure 36). Given the high informality in agriculture
12means that the
Employment informality
in agriculture rate amonga rebound
has experienced the poor and
since thepartly
2012, bottom 40 isofhigh.
as a result newthatThe volatility
investment and
in the sector
relative to other sectors, this dependence on agricultural employment means the informality rate among
seasonality
since
the
2007, butofit isagriculture
poor and the bottomin40Moldova,
unclear if this rebound will including frequent
be sustainable.
is high. The volatility andclimatic shocks,
seasonality of in addition tointrade
agriculture bans including
Moldova,
by Russiaclimatic
frequent for certain agricultural
shocks, products,
in addition to trademeans
bans that these workers suffer large fluctuations in
13
26 by Russia for certain agricultural products, means that
income and are highly vulnerable. In 2013,
these workers suffer large fluctuations in income and are farmers andhighly
agricultural workers,
vulnerable. 13
In together, accounted
2013, farmers and agricultural
for 40 percent of the poor. Overall, although farm income continues to make
workers, together, accounted for 40 percent of the poor. Overall, although farm income continues up a significant part of to make
up
theaincome
significant part of thehouseholds,
of smallholder income of smallholder
its importance households,
has declined itsinimportance
recent years, has declined
from in recent years,
30 percent
from 30 percent in 2007 to 18 percent in 2013, because of the drought
in 2007 to 18 percent in 2013, because of the drought in 2007 and the global crisis in 2008–09,in 2007 and the global crisis in 2008–
09, among
among other
other factors.factors.
14 14
Figure 35. Employment sector of the poor Figure 36. Employment sector of the bottom 40
22% 15% 22%
43% 36% 8% 26%
15% 45% 41% 10%
15%
13%
18% 18% 14%
77% 69%
64% 51% 59%
39% 37% 45%

2007 2014 2007 2014
Agriculture Mining & manufacturing Services Agriculture Mining & manufacturing Services
Although
Although wage wagegrowthgrowthslowedslowedduringduringthethecrisis, it has
crisis, beenbeen
it has positive since.
positive Average
since. wageswages
Average recovered from
zero growth in 2011 to 4 percent in 2012 and almost 6 percent in 2014. The growth was mainly in the
recovered from zero growth in 2011 to 4 percent in 2012 and almost 6 percent in 2014. The growth
nonagricultural sectors, which explains the larger contribution of nonagricultural labor income to income
was mainly
growth and in the nonagricultural
poverty reduction (see sectors,
Figurewhich
25 andexplains
Figurethe26).larger contribution
However, becauseofofnonagricultural
the concentration of the
labor income to income growth and poverty reduction (see Figure
poor and the bottom 40 in low-productivity agriculture and the fact that agricultural wages 25 and Figure 26). However,
are persistently
because of the concentration of the poor and the bottom 40 in low-productivity agriculture and the
13 The number of the employed in agriculture ranges from 200,000 during the winter to over 400,000 during the second and third quarters.
fact are
There that
alsoagricultural
large seasonalwages are
variations persistently
in the lower
number of hours than
worked perwages in services
week (Ronnås 2015). and industry, the gap in
labor
14 income
Möllers (including
et al. (2016) providewages andonearnings
more detail conditionsfrom
amongself-employment) between
small farms and their impact the bottom 40 and the
on poverty.
top 60 has shown limited signs of narrowing in recent 14 years (Figure 37 and Figure 38).
Figure 37. Average monthly salary earnings for Figure 38. Monthly labor income, bottom 40
employees, by sector and top 60
Although wage growth slowed during the crisis, it has been positive since. Average wages
recovered from zero growth in 2011 to 4 percent in 2012 and almost 6 percent in 2014. The growth
was mainly in the nonagricultural sectors, which explains the larger contribution of nonagricultural
labor income to income growth and poverty reduction
Poverty (see Figure
and Shared 25 and
Prosperity Figure 26).Progress
in Moldova: However,and Prospects
because of the concentration of the poor and the bottom 40 in low-productivity agriculture and the
lower thanagricultural
fact that wages in services andpersistently
wages are industry, the gapthan
lower in labor income
wages (including
in services wages and
and industry, theearnings
gap in from self-
employment) between the
labor income (including bottom
wages 40 and the
and earnings fromtopself-employment)
60 has shown limited
betweensigns of narrowing
the bottom 40 andintherecent years
(Figure 37 and Figure 38).
top 60 has shown limited signs of narrowing in recent years (Figure 37 and Figure 38).
Figure 37. Average monthly salary earnings for Figure 38. Monthly labor income, bottom 40
employees, by sector and top 60
600
300
USD 2005 PPP
USD 2005 PPP

250
400 200
150
200 100
50
Agriculture Industry Services B40 T60
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2007 2008 2009 2010 2011 2012 2013 2014
Source: World Bank calculations based on NBS data. Source: World Bank calculations based on the HBS.
Note: Average gross monthly earning represents the relation between
the gross amounts for employees by the economic and social units
13 The number
(remuneration Note:
fund) theAverage
ofand the numbergross
employed ofin monthly
agriculture
employees. earning
rangesrepresents the relation
from 200,000 during
the winter to over 400,000 during the second
between
and third quarters. Theretheare
gross amounts
also for employees
large seasonal by the
variations ineconomic and of hours worked per week (Ronnås 2015).
the number
14 Möllers et al.social
(2016)units (remuneration fund) and the number of employees.
provide more detail on conditions among small farms and their impact on poverty.
More broadly, More givenbroadly,
the semisubsistence
given the nature of the farm Figure 39. Share of low-intensity agriculture
semisubsistence
sector, its potential to be a driver of
nature of the farm sector, its potential progress 27 is limited.
to be a among adults (aged 15+)
Semisubsistence farming is a core component
driver of progress is limited. Semisubsistence of rural 30%
livelihood strategies, and this is likely to persist
farming is a core component of rural livelihood in the medium 25%
and longer term. Smallholder farming is prevalent in
strategies, and this is likely to persist in the medium 20%
agricultural work. The 2011 General Agricultural Census
revealed thatand longer
thanterm. Smallholder farminglessis prevalent 15%
more half the farms cultivate than 0.5
10%
hectares, andinabout agricultural work.use
95 percent The an2011 General
area less thanAgricultural
3 hectares.
Census 5%
Small family farmsrevealed
producethat more 71
around thanpercent
half the of farms
total
0%
agricultural cultivate
output.15 less than production
Livestock 0.5 hectares,is and about 95
also primarily 2007 2008 2009 2010 2011 2012 2013 2014
managed bypercent use an 16area
smallholders. Most less smallholder
than 3 hectares. farmsSmall are
Poor B40 Non-poor T60
subsistence farms.
family Subsistence
farms produce farmaround
households accounted
71 percent for
of total
74 percent of all farm output.
agricultural households15 in 2013,
Livestock a rise from
production 73 Source: World Bank calculations based on the HBS.
is also
percent in 2007. primarilySmallholder
managed farmsbyare smallholders.
more likely to switch
16
Most
to subsistence smallholder farms are subsistencetofarms.
farming (39 percent) than commercial
Subsistence farming
farm (13 percent).
households Adults are
accounted increasingly
for 74 percent of
engaging in low-intensity farming (less than 20 hours a week), especially among the
all farm households in 2013, a rise from 73 percent in 2007. Smallholder farms are more likely to
poor and the bottom 40
(Figure 39).17
switch to subsistence farming (39 percent) than to commercial farming (13 percent). Adults are
Dependenceincreasingly
on subsistence engaging in low-intensity
farming undermines
17
farmingthe(less thanof20households
ability hours a week), to especially
enhance among the poor
their welfare.
and the bottom 40 (Figure 39).
Subsistence farming is often labor intensive; the level of productivity is typically low and, in Moldova,
steadily declining.
Dependence This outcome is linked to
on subsistence missingundermines
farming investmentsthe andability
a lack of
of capital and credit
households availability,
to enhance their
which have resulted in low-yield technologies and poor use of fertilizers and pesticides.
welfare. Subsistence farming is often labor intensive; the level of productivity is typically low
18
Subsistence farming
and, in
households Moldova,
are often steadily
small and woman-headed
declining. This outcome andischaracterized
linked to missingby lower educational
investments attainment
and a lack of capitaland
and
older household heads with health problems, which means that the members of these households have few
credit availability, which have resulted in low-yield technologies and poor use of fertilizers and
alternatives in the labor 18
market. Lacking a dynamic land rental system, smallholders have limited
opportunities pesticides. Subsistence
to commercialize andfarming
increasehouseholds
the size of are often
their small
farms. Lowandnonfarm
woman-headed
income and
also characterized
means they
by lower educational attainment and older household
do not have sufficient resources to mechanize or invest in inputs to raise productivity. heads with health problems,
19 which means that
the members of these households have few alternatives in the labor market. Lacking a dynamic land
rental system, smallholders have limited opportunities to commercialize and increase the size of their
farms. Low nonfarm income also means they do not have sufficient resources to mechanize or
15 Volk et al. (2015). 19
16 World Bankinvest
(2015a).in inputs to raise productivity.
17 This analysis draws on Möllers et al. (2016).
18 Munoz et al. (2015).
19 Public transfers, mainly pensions, drove some improvement in living standards
Möllers et al. (2016).
Income growth and poverty reduction were partly driven by a pension increase. They
contributed to reducing poverty by 4.8 percentage points in 2007–14. Average pensions rose 50
15 20 This partly led to an increase in the share of
percent cumulatively in real terms in that period.
Public transfers, mainly pensions,

drove some improvement in living standards
Income growth and poverty reduction were partly driven by a pension increase. They contributed to
pensions in total income among the poor and the bottom 40. More importantly, pensions were the
reducing poverty by 4.8 percentage points in 2007–14. Average pensions rose 50 percent cumulatively in real
mainindriver
terms lifting 20people
that period. out ofledpoverty
This partly and outinofthe
to an increase theshare
bottom 40. In particular,
of pensions the pension
in total income among the poor
and the bottom 40. More importantly, pensions were the main driver lifting people out of poverty the
increases in 2009 and 2010 generated a reduction in the share of pensioners who were among and out of the
poor and
bottom theparticular,
40. In bottom 40, theleading
pensionto increases
a drop in in
the2009
average
and pension among athese
2010 generated groupsin(Figure
reduction 40 and
the share of pensioners
Figure
who 41);among
were in otherthewords, the composition
poor and the bottom 40,of those in the
leading to avarious
drop ingroups changed.
the average The government
pension among these groups
raised 40pensions
(Figure and Figure and 41social assistance
); in other thatthesupported
words, composition vulnerable
of those categories of the groups
in the various population
changed. The
government
significantly, though mostly in urban areas. However, because real pensions fell slightly in 2011,population
raised pensions and social assistance that supported vulnerable categories of the
significantly, though back
pensioners moved mostlyintoin the
urban areas.40However,
bottom and among because real pensions
the poor, causing fell slightly
a rise in thein average
2011, pensioners
moved back into the bottom
pension among these groups. 40 and among the poor, causing a rise in the average pension among these groups.
Figure 40. Real growth, average monthly pension, Figure 41. Real growth, average monthly
% year-on-year pension, by welfare group, % year-on-year
20% 25%
20%
15% 15%
10%
10% 5%
0%
5% -5% 2008 2009 2010 2011 2012 2013 2014
-10%
0%
2008 2009 2010 2011 2012 2013 2014 Poor Non-poor
-5% Bottom 40 Top 60
Source: World Bank calculations based on NBS data. Source: World Bank calculations based on the HBS.
The
The expanding
expanding role ofof
role pensions
pensions is is
reflected in in
reflected thethe
structure ofof
structure household
household incomes.
incomes.The share
The of pensions
share
inofthe budgetsinofthe
pensions thebudgets
poor rose from
of the poor23.2 percent
rose from 23.2to 27.7 percent
percent during
to 27.7 the period.
percent A similar
during the period. pattern
A was
observable among the bottom 40 (Figure 42 and Figure 43). Pensions are a key income source: around 28
similar pattern was observable among the bottom 40 (Figure 42 and Figure 43). Pensions are a key
percent and 20 percent of total household income among the poor and the bottom 40 were accounted for by
income in
pensions source:
2014,around 28 percent
respectively, comparedand 20 percent
with of total
17 percent household
among incomeand
the nonpoor among the60.
the top poor
Theand
dependence
onthepension
bottomincome
40 were was much larger
accounted for byamong urban
pensions in households, while the
2014, respectively, dependence
compared onpercent
with 17 remittances was
greater
amongamong rural households
the nonpoor and the top(Figure
60. The44dependence
and Figure on 45).pension income was much larger among
urban households, while the dependence on remittances was greater among rural households (Figure
Figure
44 and42. Income
Figure 45).structure of the poor, % Figure 43. Income structure of the bottom 40, %
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
2007 2014 2007 2014
Labor income Agriculture income Labor income Agriculture income
Pensions Social assistance Pensions Social assistance
Remittances Other Remittances Other
20 Figure 44.
NBS data. Income structure, poor, by area 29Figure 45. Income structure, bottom 40, by area
100% 16 100%
80% 80%
60% 60%
2007 2014 2007 2014
Figure 44. Income structure, poor, by area Figure 45. Income structure, bottom 40, by area
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
Rural poor Urban poor Rural poor Urban poor Rural Urban Rural Urban
2007 2014 2007 2014

Social
Socialassistance
assistanceisistargeted,
targeted, but thethe
but benefits are are
benefits small and and
small insufficient to protect
insufficient the poor
to protect the and
poorvulnerable.
The
and vulnerable. The share of social assistance in the budgets of poor households rose from 4.4
share of social assistance in the budgets of poor households rose from 3.6 percent to 3.6 percent in
2007–14.
percent toSocial assistance
4.4 percent provided
in 2007–14. a cushion
Social assistancetoprovided
households in 2009
a cushion and 2012, when
to households in 2009total
and household
consumption
2012, when total household consumption stagnated following the contraction of GDP during thethe drought
stagnated following the contraction of GDP during the crisis in 2009 and during
of 2012. The real growth in social assistance was high among both the poor and the bottom 40 during these
crisis in 2009 and during the drought of 2012. The real growth in social assistance was high among
two periods. Meanwhile, social assistance did not grow among the top 60 and the nonpoor in 2012, indicating
bothtargeting
that the poorwas andeffective
the bottom 40 during
(Figure 46). Asthese twothe
a result, periods.
share Meanwhile, social assistance
of social assistance did not among the
almost doubled
grow from
poor, among4 the top 60
percent to and the nonpoor
8 percent in 2012,
in 2007–13, indicating
although thatagain
it fell targeting was effective
in 2014 (Figure 46). declined
even as consumption
As a result,
(Figure the share
47). The main of social programs
targeted assistance almost doubled
are Ajutor Socialamong
(socialtheaid)
poor,
andfrom 4 percent
a heating to 8 program,
allowance
percent in 2007–13, although it fell again in 2014 even as consumption declined
both of which specifically address people most in need and are relatively well targeted. However, (Figure 47). Thecoverage is
main
not targeted
wide, whichprograms
limits theare Ajutor
ability Social
of the (social to
programs aid)respond
and a heating
to sharpallowance
downturns program, both of such as in
in consumption
2014.
whichThe level of address
specifically the benefits
peoplearemost
alsoinnot sufficient
need and aretorelatively
providewell
full targeted.
security However,
for the vulnerable
coverage categories
is of
the population. There is substantial room for additional support.
not wide, which limits the ability of the programs to respond to sharp downturns in consumption
such as in 2014. The level of the benefits are also not sufficient to provide full security for the
Figure 46. Real year-on-year growth of social Figure 47. Share of social assistance in overall
vulnerable categories of the population. There is substantial room for additional support.
assistance, by group income, by group
50% 10%
8%
30%
6%
10%
30 4%
-10% 2008 2009 2010 2011 2012 2013 2014 2%
-30% 0%
2007 2008 2009 2010 2011 2012 2013 2014
-50%
Poor Non-poor Poor Non-poor Bottom 40 Top 60
Bottom 40 Top 60
Migration and remittances have shaped growth, poverty

Migration and remittances have shaped growth, poverty reduction, and shared
reduction,
prosperity and shared prosperity
21
21
Migrationisissubstantial,
Migration substantial,and andaalarge
largeshare
shareofofmigrants
migrants are are labor
labor migrants.
migrants. Although
Although precise
precise data are
data areonlacking
lacking labor on labor migrants
migrants from Moldova,
from Moldova, variousvarious estimates
estimates point point to a high
to a high shareshare of the
of the working-age
population
working-age looking for jobs
population and working
looking abroad.
for jobs and According
working abroad. to the LFS,to
According a peak of labor
the LFS, emigrants,
a peak of labor 394,500,
was registered
emigrants, in 2005.
394,500, The results
was22 registered in of surveys
2005. 22
Theconducted by the Center
results of surveys conducted of Sociological
by the CenterResearch
of and
21 Sociological Research
This subsection draws onand Marketing
Prokhorova (2016).suggest that one-quarter of the economically active population
22 was
Labor
working abroad in mid-2006.23 15
migrants are defined as people ages and above who
According to are lookingrecent
a more for workInternational
or working abroad.
Labour Organization
survey on labor force migration in Moldova, 460,000 people, 17 or 17 percent of the working-age
population, were working abroad in 2012.24 The share of the economically active population
involved in labor emigration grew from 8 percent to 27 percent in 2000–05. In recent years, the
Marketing suggest that one-quarter of the economically active population was working abroad in mid-
2006.23 According to a more recent International Labour Organization survey on labor force migration in
Moldova, 460,000 people, or 17 percent of the working-age population, were working abroad in 2012.24 The
share of the economically active population involved in labor emigration grew from 8 percent to 27 percent
in 2000–05. In recent years, the number of people working abroad stabilized, but the economically active
population continues to decrease, hence raising the share of migrants among the active population (Figure
48).25
Figure 48. Adult population (15+) who are active in Moldova or abroad, 2000–14
2,000 3,500
Thouseand people
Thousand people
1,500 3,400
1,000 3,300
500 3,200
0 3,100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Population 15+, working or looking for work abroad (left)
Population 15+, active (left)
Population 15+ (right)
Sources: World Bank calculations based on World Population Prospects: The 2015 Revision (database), Population Division,
Department of Economic and Social Affairs, United Nations, New York, http://esa.un.org/unpd/wpp/; NBS data.
Migrantsare
Migrants areusually
usuallymen
menwho who work
work inin low-skilled
low-skilled jobs. TheThe profile
profile of
of labor
labor emigrants
emigrantschanged
changed over the
over the
2000s, 2000s, the
reflecting reflecting
shifts inthethe
shifts in the composition
composition of the population.
of the population. Recentshows
Recent research research
thatshows
the average age
ofthat
a typical emigrant
the average age ofincreased
a typicalsubstantially, from 30.5–31.0
emigrant increased years
substantially, fromin 2000–02
30.5–31.0toyears
35.0–36.0 yearstoin 2010–12.
in 2000–02
According
35.0–36.0 years in 2010–12. According to LFS data, men dominated among emigrants, accountingof the total
to LFS data, men dominated among emigrants, accounting for about 67.6 percent
registered
for about in 67.62012. Theofmain
percent group
the total of migrants
registered wasThe
in 2012. represented
main group by of
people employed
migrants in low-skilled jobs
was represented
(61.9 percent),
by people especially
employed in construction
in low-skilled (56.5percent),
jobs (61.9 percent especially
of total migrants). About(56.5
in construction one-third were
percent of employed
astotal
unqualified labor (32.5 percent), and only 17.9 percent were employed in services
migrants). About one-third were employed as unqualified labor (32.5 percent), and only 17.9
and trade ( Table 1).26 In
recent years, however, there has been an increase in the26share of emigrants with higher educational attainment,
percent were
mirroring the employed
improvement in services (Table 1). within
and tradeattainment
in educational In recenttheyears, however,
general there has been an
population.
increase in the share of emigrants with higher educational attainment, mirroring the improvement in
educational
Table attainment
1. Moldovan laborwithin the general
emigrants, population.
by labor sector in home and destination countries, 2012
Table 1. Moldovan labor emigrants, by labor sector in home and destination countries, 2012
Labor sector
Labor sector In home
In home country,
country, % % In destination
In destination country, % country, %
Agriculture and
Agriculture andforestry
forestry 43.3 43.3 2.8 2.8
Mining 9.5 2.6
Mining
Construction 13.1
9.5 56.5
2.6
Construction
Trade and commerce 11.6 13.1 9.7 56.5
Services
Trade and(hospitality
commerce sector) 2.2 11.6 3.6 9.7
Transport and communication
Services (hospitality sector) 5.0 2.2 3.6 3.6
Household services and assistance 0.2 18.7
Transport and communication
Other activities 15.1 5.0 2.5 3.6
Household
Total services and assistance 100.0 0.2 100.0 18.7
Sources: Prokhorova 2016; calculations based on Vremiș et al. 2012.
Other activities 15.1 2.5
Total
The unique geographic location of Moldova 100.0 has provided the population with 100.0many
Sources: Prokhorovafor
opportunities 2016;migration.
calculations based on Vremiș
Situated et al. 2012.
between the EU and Russia, many Moldovans choose these
twoLücke,
23 keyMahmoud,
emigration directions.
and Pinger (2007). Currently, in the Commonwealth of Independent States (which
attracts
24 63 percent of all Moldovan emigrants), the most popular migration destination is Russia (56
ILO (2012).
25 These shares are based on population numbers estimated from the 2004 Census. The 2014 Census, which has yet to be released may
percent
indicate ofpopulation
lower the labor migrant
overall, higherstock). In the EU,
share of migrants which
to working ageaccounts
population. for approximately 30 percent of all
26 Ibid.
Moldovan emigrants, the dream migration country is Italy (19 percent), followed by Poland and
18
26 Ibid.
32
The unique geographic location of Moldova has provided the population with many opportunities for
migration. Situated between the EU and Russia, many Moldovans choose these two key emigration
directions. Currently, in the Commonwealth of Independent States (which attracts 63 percent of all Moldovan
emigrants), the most popular migration destination is Russia (56 percent of the labor migrant stock). In the
EU, whichThe
Romania. accounts for approximately
migration outflows toward 30the
percent of alldestinations—Russia
two main Moldovan emigrants, andtheItaly—differ
dream migration
not country
is Italy
only (19 percent),
in absolute followed
numbers, but alsobyinPoland and Romania.
gender composition andThe migration
the rural or urbanoutflows toward
background the two main
of the
destinations—Russia and Italy—differ not only in absolute numbers, but also
migrants. For example, emigrants oriented toward Russia are more typically men from rural areas,in gender composition and the
rural or urban background of the migrants. For example, emigrants oriented toward Russia are more typically
whereas women represented 68 percent of the emigrants to Italy. While, in Italy, the typical migrant
men from rural areas, whereas women represented 68 percent of the emigrants to Italy. While, in Italy, the
jobs include
typical migrant babysitting
jobs include andbabysitting
catering, foreign workers
and catering, in Russia
foreign workersarein mostly
Russia areemployed
mostly inemployed in
27
construction. 27 Relatively older migrants prefer the EU, while younger migrants prefer the
construction. Relatively older migrants prefer the EU, while younger migrants prefer the Commonwealth
28
Commonwealth
of Independent of Independent
States. 28 States.
Migrants Migrants
to Russia aretomore
Russia are more
likely likely
to stay to stay
there, giventhere,
thegiven
legalthe
possibility of
legal possibility of obtaining Russian citizenship, while migrants to Europe are more
obtaining Russian citizenship, while migrants to Europe are more likely to return to Moldova in their likely to return
to Moldova These
retirement. in their retirement.
differences haveThese differencesforhave
implications implications
remittance for remittance
behavior. behavior. in the EU
Migrants working
countries earn more
Migrants working in and
the EU sendcountries
larger amounts
earn moreof money
and sendhome,
largerwhile thoseof
amounts working
money in Russia
home, send relatively
while
small amounts of money. 29
those working in Russia send relatively small amounts of money. 29
The migration
The migration patterns
patterns resulted
resulted inin aasurge
surgeininremittances.
remittances.Because
Becauseofofthethelimited
limitedproductive
productive capacity of
capacity
the of thewhich
economy, economy, which wasinreflected
was reflected in low productivity
low productivity and little employment
and little employment creation, creation,
remittance inflows
remittance inflows were the primary force driving the boom in private consumption
were the primary force driving the boom in private consumption and the surge in imports during and the surge in the 2000s.
imports during
Remittances arethe 2000s. Remittances
a critical are a critical
source of foreign currencysource of foreignthey
in Moldova: currency in Moldova:
are second they are and before
after exports
foreign directexports
second after investment, loans,foreign
and before and external assistance on
direct investment, the list
loans, andofexternal
sourcesassistance
of foreignonexchange.
the list In 2010–
14, remittances accounted for around 20 percent of the income growth of
of sources of foreign exchange. In 2010–14, remittances accounted for around 20 percent of the bottom 40. In the
2006–08, they
surpassed social of
income growth protection
the bottom payments
40. Into 2006–08,
households through
they pensions,
surpassed socialchild allowances,
protection compensation,
payments to and
other social support (Figure 49 ).
households through pensions, child allowances, compensation, and other social support (Figure 49).
Figure 49. Remittances as a share of monthly disposable household income, 2006–14, %
30
25
20
15
10
5
0
2006 2007 2008 2009 2010 2011 2012 2013 2014
urban rural all areas social protection payments
The
Theeconomy
economywas washighly dependent
highly dependenton on
remittances. As aAs
remittances. share of GDP,
a share remittance
of GDP, inflowsinflows
remittance tripled from 11.5
percent to a peak
tripled from 11.5 of 32.8 percent
percent in 2000–06,
to a peak a period
of 32.8 percent in of substantial
2000–06, poverty
a period of reduction,
substantial but also declines in
poverty
employment.
reduction, but also declines in employment. By 2014, remittances represented 26 percent of GDP, the Kyrgyz
30
By 2014, remittances represented
30 26 percent of GDP, and, after Tajikistan and
Republic, Moldova was
and, after Tajikistan the Kyrgyz
and the most remittance-dependent
Republic, Moldova wascountry
the mostinremittance-dependent
the region (Figure 50country
). Overall, about a
fourth of the population benefited from remittances in 2014. Among the nonpoor, 26.7 percent received
in the region (Figure 50). Overall, about a fourth of the population benefited from remittances in
remittances, and remittances accounted for 54.6 percent of their incomes. Although a smaller share among the
poor received remittances, 14.9 percent in 2014, those who did were highly dependent on them, deriving more
than half of their incomes from these flows. The share of the inflows in disposable household income was two
27 Hristev et al. (2009).
28 ILO (2012).
times
29 greater among rural households receiving remittances relative to corresponding urban households.
Prohnițchi and Lupușor (2013).
27 HBS dataet al.
for(2009).
this period does not include data on household incomes, thereby curtailing the use of poverty
30
Hristev
decompositions
28 ILO (2012). and income growth exercises to determine the role of remittances more clearly.
29 Prohnițchi and Lupușor (2013).
30 HBS data for this period does not include data on household33incomes, thereby curtailing the use of poverty decompositions and income
growth exercises to determine the role of remittances more clearly.
19
percent of their incomes. Although a smaller share among the poor received remittances, 14.9
percent in 2014, those who did were highly dependent on them, deriving more than half of their
incomes from these flows. The share of the inflows in disposable household income was two times
greater among rural households receiving remittances relative to corresponding urban households.
Figure 50. Remittances as a share of GDP, 2014
50%
40%
30%
20%
10%
0%
Source: World Bank calculations based on data of the Development Economics Prospects Group.
Alongside
Alongsidepensions,
pensions,migration
migrationand andremittances
remittances contributed
contributed to lifting people
to lifting out ofout
people poverty. Remittance-
of poverty.
receiving households were more likely to be in rural areas (56 percent). Remittances
Remittance-receiving households were more likely to be in rural areas (56 percent). Remittances helped many households
escape
helped poverty and boost their
many households welfare.
escape poverty Indeed, in 2014,
and boost 17.9
their percent
welfare. of the nonpoor
Indeed, would
in 2014, 17.9 have been
percent of poor
had they not received remittances. Among remittance-receiving households, 60 percent would have been in
the nonpoor would have been poor had they not received remittances. Among remittance-receiving
the bottom quintile without remittances. Remittances helped move 75 percent of these households to higher
households,
income 60 (Figure
groups percent51).would
Theyhave
alsobeen
helpedin reduce
the bottom quintile without
inequality—the remittances. Remittances
Gini coefficient—from 0.29 to 0.22.31
helped move 75 percent of these households to higher income groups (Figure 51). They also helped
reduce inequality—the
However, Gini coefficient—from
not all households 0.22.31 The share of emigrants in the total population
0.29 to income.
benefit from remittance
varies across the country. For example, the highest emigration rates were registered in southern Moldova, a
However, not all households benefit from remittance income. The share of emigrants in the
poorer region. Thus, in Gagauzia, up to 34 percent of the adult population works and resides abroad. The
total population
share is much lowervaries
in across the country.
the northern part ofFortheexample,
country.the highest temigration
However, rates were
he survey conducted in registered
12 rural raions in
in southern Moldova, a poorer region. Thus, in Gagauzia, up to 34 percent of the
2008 by the Center of Sociological Research and Marketing found that around 25 percent of emigrant adult population
works and resides
households cannotabroad.
count onTheremittances
share is much fromlower in the
abroad. 32 northern part of the country. However,
Therefore, although the northern and central
regions do not
the survey send outinthe
conducted 12most
ruralemigrants,
raions in they2008account
by the for the majority
Center of remittance
of Sociological Researchhouseholds,
and 31
percent and 44 percent, respectively.33
Marketing found that around 25 percent of emigrant households cannot count on remittances from
abroad.32 Therefore, although the northern and central regions do not send out the most emigrants,
Figure 51. Household
they account welfare
for the majority of ranking
remittancebefore (left) and
households, 31 after (right)
percent remittances
and 44 percent, respectively.33
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
0% 0%
1 2 3 4 5 1 2 3 4 5
31 The welfareConsumption
estimates withquintile
and without remittances
before do not take into account household
remittances coping
Consumption behaviors.
quintile after remittances
Non-remittance HH Remittance HH Non-remittance HH
33 Data of the 2007 European Bank for Reconstruction and Development’s survey on remittances in Moldova.
Remittance HH
34
IV. Abiding challenges and the issue of sustainability
The remaining challenges that could affect the prospects for poverty reduction and shared
prosperity include (1) spatial and cross-group inequalities and (2) increasing risks to sustainable
progress.
31 The welfare estimates with and without remittances do not take into account household coping behaviors.
33 Data of the 2007 European Bank for Reconstruction and Development’s survey on remittances in Moldova.
Spatial and cross-group inequalities persist
20
The poor and bottom 40 are concentrated in rural areas
Moldova is a rural country, and poverty is a rural phenomenon. Around two-thirds of the population are estimated to live in
Abiding challenges
4. and the issue

of sustainability
The remaining challenges that could affect the prospects for poverty reduction and shared prosperity include
(1) spatial and cross-group inequalities and (2) increasing risks to sustainable progress.
Spatial and cross-group inequalities persist

The poor and bottom 40 are concentrated in rural areas
Moldova is a rural country, and poverty is a rural phenomenon. Around two-thirds of the population are
estimated to live in rural areas.34 Most people live in the north (31.5 percent) and the center (30.5 percent).
Although the share of the rural population has declined, partly driven by labor migration, the urbanization
profile reveals a greater similarity with Central Asia than with Eastern Europe (Figure 52). Rural poverty
stands at 19 percent compared with urban poverty, at 5 percent. Of the bottom 40, 75 percent live in rural
areas, while 84 percent of the poor live in rural areas; only 7 percent and 2 percent, respectively, live in large
cities (Figure 53 and Figure 54). This is consistent with a higher poverty rate in rural areas relative to cities.
Part of the higher poverty rates in rural areas may be associated with the nature of income sources. Rural
people are dependent on agricultural income and remittances, which are more volatile compared with other
income sources, making these people more vulnerable to poverty (see below and Figure 42 and Figure 43).
Figure 52. Urban population share in selected countries, %

100
80
60
40
20
0
1990 2014 2050

Sources: Prokhorova 2016; calculations based on NBS data.
Residence in rural
Figure 53. Type areas alsopoor
of settlement, explains the poor’s limited
and nonpoor access
Figure 54. Typeto
ofmarkets,
settlement,jobs, and40
bottom modern
and topservices.
60
The lack of road infrastructure and transport services plays a crucial role in preventing people from
connecting to employment and economic5%
14%opportunities, markets, health
13% care, and education;
13% 9%the extent to
27% 26% 31% 34% 18%
which this is a constraint on rural areas in Moldova requires more research (see below and Box 2). Thus,
17% 18%
19%
although a greater share of the20%
population is living in rural areas,
19% the rural population20% receives only a quarter
81%
34 Preliminary results 70%
of the 2014 census show urban areas accounting for 34.2 percent of the population (995,227 people),73%
70% compared with
54%(1,918,054 people) in rural 54%
65.8 percent 50% estimates of the urban and
areas. In June 2015, the NBS produced lower 46%rural populations: 1,507,3000
(42.4 percent) and 2,047,900 (57.6 percent), respectively. See “Demographic Situation in the Republic of Moldova in 2014,” NBS, Chișinău, http://
www.statistica.md/newsview.php?l=en&idc=168&id=4787.
21
2007 2014 2007 2014
Rural Small towns Big cities Rural Small towns Big cities
40
20
0
of the amount of water supplied to the 1990urban

2014population.
2050 Similarly, urban residents receive almost four
times
Sources:more gas than
Prokhorova the ruralbased
2016; calculations population. 35
on NBS data.
Figure 53. Type of settlement, poor and nonpoor Figure 54. Type of settlement, bottom 40 and top 60
13% 5% 13% 9%
27% 26% 14% 31% 34%
17% 18% 18%
19% 20% 19% 20%
70% 81% 73%
70%
54% 54% 50% 46%

2007 2014 2007 2014
Rural Small towns Big cities Rural Small towns Big cities
Residence in rural areas also explains the poor’s limited access to markets, jobs, and
modern services. The lack of road infrastructure and transport services plays a crucial role in
Box 2. Transport
preventing people from and Household
connecting Welfare
to employment andin Moldova
economic opportunities, markets, health
care, and education; the extent to which this is a constraint on rural areas in Moldova requires more
The literature suggests that transport infrastructure and policies—direct transport infrastructure
research (see below
investments, priceand Box 2). Thus,
instruments, although a greater
and regulations—can sharebeneficial
induce of the population
outcomesisamong
living households
in rural and
areas, thefoster
firms, rural growth,
population
andreceives
reduce only a quarter
poverty throughof the
five amount of water supplied
key mechanisms: to thetransport
(a) lowering urban costs
(includingSimilarly,
population. time costs), which promotes
urban residents trade four
receive almost andtimes
structural change
more gas in rural
than the localpopulation.
economies,35
creates
agglomeration effects, and leads to higher productivity; (b) improving access to input, output, and labor
Box 2. Transport
markets andhealth
and public Household Welfare
care and in Moldova
education services, especially in remote and rural areas, which favors
The literature
social suggests
inclusion andthat transport
provides infrastructure
better matches to andthe
policies—direct transport
skills and needs infrastructure
of individuals; investments,
(c) cutting the prices of
price instruments, and regulations—can induce beneficial outcomes among households
consumption goods and services; (d) creating jobs in road construction and maintenance and and firms, fosterin public
growth, and reduce
and private poverty services;
transport through five
andkey mechanisms: (a)
(e) expanding lowering transport
connectivity across costs (including
regions time costs),
and sectors to promote
which promotes trade and structural change in local economies, creates agglomeration effects, and leads to
mobility and enhance productive capacity. a
higher productivity; (b) improving access to input, output, and labor markets and public health care and
education services, especially in remote and rural areas, which favors social inclusion and provides better
These beneficial effects largely depend on supportive conditions in other sectors. Thus, linking unemployed
rural workers to nonfarm jobs may require training to trim the skill mismatch, and manufacturing, trade,
35 World Bank (2016b).
and service development needs an enabling environment for doing business (Berg et al. 2015). The link
between better transport infrastructure and poverty 36 reduction through greater farm production can be
mediated by solving issues of land ownership, access to credit, trade barriers, and labor mobility (Starkey
and Hine 2014).
Transport policies may also affect households and locations differently, which often leads to ambiguous
aggregate effects. For instance, households in a village closer to an urban center are likely to pay lower
prices for consumer goods (manufacturing and services) because of lower transport costs (Emran and
Hou 2013). But they may also face higher prices for housing and agricultural products because of their
urban proximity. The relocation of activities from one place to another induced by changes in the transport
network may have potential gains in one place and losses in the other (Berg et al. 2015). Rural residents
with greater access to capital and resources, particularly more well educated individuals, are more able to
adapt to changing market conditions and use new economic opportunities. For this reason, transport
upgrades are less likely to benefit the chronically poor, at least in the short run (Benjamin et al. 2002;
Duncan 2007; Starkey and Hine 2014).
Given the large urban-rural welfare gap in Moldova, exploring how connectivity is associated with
household consumption, income, and employment outcomes in rural areas is key. This may help expand
the knowledge base within a multicriteria approach to prioritize road investments through a welfare and
equity lens.
35 World Bank (2016b).
22
This initial research focuses on a specific aspect of transport infrastructure and policies: the distance of
households to roads. Using new geographic information system–based data on the distance of communities
to three types of roads, local, republican, and magistral (highways), merged with data on households and
individuals from the 2008–13 HBSs can help identify the links between distance to roads, household
welfare, and labor market outcomes. Proper instruments to deal with the potential endogeneity of transport
investments were not found; so, this paper relies on repeated cross-sections with raion- and year-fixed
effects and assumes that the road network and the quality of the network rarely change within a short
period.
The results on the effect of distances to local, republic, and magistral roads on outcome variables among
rural households and individuals are mixed and nonrobust. These outcome variables include real and
spatially deflated rural household per capita consumption, labor income, agricultural income among
individuals, rural household nonfarm income, the probability of poverty based on the absolute poverty
line and subjective measures, an individual’s probability of employment, and the probability of employment
in agriculture, conditional on being employed.
The results suggest other aspects of transport infrastructure and policies should be examined, such as
prices and transport services, which may matter more than distance to roads. Research is thus needed to
identify how road quality, transport costs, and the market for transport services affect, especially, rural
welfare. Given the heterogeneous effects of transport connectivity on labor markets and household welfare,
the impact may be muted, and unpacking the household and individual benefits of enhanced road networks
would be crucial.
Source: Kupets, Olga (2016), Background paper, with Abla Safir, World Bank, Washington, DC.
a. Berg et al. (2015) supply a recent review of the literature on transport policies and development. Starkey and Hine (2014) provide
a review of existing research on the relationship between transport and poverty reduction (covering about 360 studies). The same
literature warns about possible negative externalities generated by transport activities such as air pollution, road accidents,
congestion, impact on health, displacement of the poor, and degradation of ecosystems.
Ethnic and language minorities have less access to services and labor market opportunities36
Ethnic and language minorities face significant barriers to using public services. Moldova is an ethnically
diverse country. Around one-quarter of the population is of other ethnic groups, such as Gagauzian,
Romanian, Russian, and Ukrainian.37 There is also substantial diversity in the languages spoken as the first
language; over a quarter of the population is not exposed to Moldovan at home. In regions where non-
Moldovan groups are more prominent, such as in Gagauzia, children receive substandard instruction in the
national language at school. In 2011, 10 percent of high school graduates in Gagauzia failed to achieve even
a minimum passing score in their Romanian language exams, and were in jeopardy of not graduating. Part
of the reason is that there are not enough qualified Romanian-speaking teachers in Gagauzia or enough
teachers willing to teach in Gagauzia to help improve the quality of learning of the national language. As the
government rolls out the open governance initiative through e-services (all in the national language), the
barriers minority groups will face in using these services will become greater.
The barriers translate into lower labor market opportunities and welfare outcomes. These gaps in
education represent disparities in human capital, which undermine the capacity to obtain quality employment.
Given that data on minority groups are scarce and tend to be underrepresented in national surveys, there is
little information about the magnitude of the disparities. For example, the Roma, who account for a small
share of the population (around 0.4 percent, though they are likely underreported), fare poorly relative to
the general population on almost all welfare indicators. One in five Roma are unable to read or write, and
36 Adapted from World Bank (2016b).
37 Based on data of the 2004 census.
23
about a third complete primary school only. One-third of Roma households live in an insecure dwelling, and
more than 80 percent do not benefit from basic housing conditions such as the supply of potable water and
sanitation facilities.38
Households with children and elderly are less well off than the rest of the population
While the gender profile is about the same among the bottom 40 and the poor relative to the rest of the
population, the age profile is different. There are no major differences in gender characteristics across the
bottom 40, the poor, the nonpoor, and the top 60. Poverty has been declining across all age-groups in recent
years, but the elderly (ages 65 and above) and children are slightly more likely to be living in poverty, and,
together, they make up 40 percent of the population. Children account for a higher portion of the poor and
the bottom 40 than of the more well off groups. The share of the population below working age is 19 percent
among the poor compared with 16 percent among the nonpoor (Figure 55). Children are also more likely to
be in the bottom 40 (Figure 56). Among the poor, the share of pensioners—the population above the upper
limit of working age—is also relatively greater. Indeed, regression results show that people ages 55 and over
are substantially more likely to be poor (see annex A). Nonetheless, some pensioners managed to rise to the
top 60, indicated by an expansion in the share of pensioners in this group (beyond the effect of aging).
Figure 55. Age composition of the poor Figure 56. Age composition of the bottom 40
18%
18% 21%
21% 16%
16% 19%
19% 16%
16% 24% 13%
13% 22%
24% 22%
64% 55% 59%

59% 53%
53% 65% 60%
60% 56%
64% 55% 65% 57%
57% 56%
18% 24%
24% 25%
25% 28%
28% 19% 19% 28%
28% 22%
22%
18% 19% 19%
Non-poor
Non-poor Poor
Poor Non-poor
Non-poor Poor
Poor T60
T60 B40
B40 T60
T60 B40
B40
2007
2007 2014
2014 2007
2007 2014
2014
Retirement age
age Working Retirement
Retirement age
age Working
Working age
age Children
Children
Retirement Working age
age Children
Children
Source: Source:
Source: World
World Bank
Bank calculations
calculations based
based on
on the
the HBS.
HBS.
Source: World
World Bank
Bank calculations
calculations based
based on
on the
the HBS.
HBS.
Poverty is
Poverty is thus
thus concentrated
concentrated amongamong larger
larger households
householdsand andhouseholds
householdswith withchildren
children andand elderly
elderly members.
members. Households Households with and
with children children
elderlyand elderly and
members members and elderly-only
elderly-only householdshouseholds
show higher poverty
showrelative
rates higher poverty
to the rates relative
overall to the overall
population (Figurepopulation
57). They(Figure
seem 57).
alsoThey
to beseem alsosensitive
more to be more to economic
downturns
sensitive tosuch as the2008–09
economic downturnsglobal
such ascrisis, the 2012global
the2008–09 drought, and
crisis, thethe 2014
2012 slowdown.
drought, and theLarger
2014households
with more children
slowdown. tend to bewith
Larger households poorer,
moreand theirtend
children progress
to be in poverty
poorer, andreduction is slower.
their progress Similarly, poor
in poverty
households exhibited a higher child dependency ratio, 47 percent in 2014, compared
reduction is slower. Similarly, poor households exhibited a higher child dependency ratio, 47 percent with 36 percent among
the nonpoor. The old-age dependency ratio among poor households is also slightly
in 2014, compared with 36 percent among the nonpoor. The old-age dependency ratio among poor higher (14 percent versus
11 percent, respectively)
households is also slightly(higher (14). percent versus 11 percent, respectively) (Figure 58).
Figure 58
Figure 57. Poverty rate, by household composition Figure 58. Dependency ratio, the poor and nonpoor
50%
50% 60
60
40%
40% 50
50
30%
30% 40
40
20%
20% 30
30
10% 20
20
10%
10
10
0%
0%
2007 00
2007 2008
2008 2009
2009 2010
2010 2011
2011 2012
2012 2013
2013 2014
2014
Non-poor
Non-poor Poor
Poor Non-poor
Non-poor Poor
Poor
HH
HH without
without children
children or
or elderly
elderly
HH Young
Young dependency
dependency ratio
ratio Old-age
Old-age dependency
dependency ratio
ratio
HH with
with children
children
HH
HH with
with elderly
elderly 2007
2007 2014
2014
HH
HH with
with children
children and
and elderly
elderly
Elderly-only
Elderly-only HH
HH
Source:
Source: World
World Bank
Bank calculations
calculations based
based on
on the
the HBS.
HBS. Source:
Source: World
World Bank
Bank calculations
calculations based
based on
on the
the HBS.
HBS.
38 Cace et al. (2007).
Migration and aging affect the demographics and, potentially, poverty. The share of people
24
who live in elderly-only households rose from 9 percent to 11 percent in 2007–14, likely driven by
migration. The elderly, however, are less likely than children to benefit from remittances. Families
with children are more likely to receive remittances, or it may be that having children and facing a
Migration and aging affect the demographics and, potentially, poverty. The share of people who live in
elderly-only households rose from 9 percent to 11 percent in 2007–14, likely driven by migration. The
elderly, however, are less likely than children to benefit from remittances. Families with children are more
likely to receive remittances, or it may be that having children and facing a higher risk of poverty are key
push factors behind migration (Figure 59). The elderly benefit less from remittances. Though 25 percent of
the population received remittances in 2014, only 10 percent of the people in elderly households did so. This
means that the latter are highly dependent on pensions, which will become less reliable in the future, raising
the risk of poverty among the elderly (see below). The poverty rate has been falling sharply among elderly
day (2005 PPP).
households, whichByare
2060,
stillthe sharethe
among of poorer
elderly groups
will have more 60).
(Figure than Indoubled, from
2013, half the12elderly
percent to 27
were living on less
39
percent
than of PPP).
day (2005
$5.00 the population,
a day By 2060,
(2005 which
the By
PPP). will
share
2060,have
of theimportant
elderly
share implications
willofhave more
elderly than
will fordoubled,
have poverty overall.
from
more than 12 percent
doubled, to 12
from 27 percent to
27 percent
percent
Figure 59. of the population,
of Composition,
the population, which
which
remittance will
havehave
willhouseholds important
important implications
implications
Figure 60. forbypoverty
for poverty
Poverty rate, overall.overall.
age
39 39
Figure
100% 59. Composition, remittance households 40% 60. Poverty rate, by age
Figure
100%
80% 40%
35%
80%
60% 35%
30%
60%
40% 30%
25%
40%
20% 25%
20%
20%
0% 20%
15%
0% Non-remittance HH Remittance HH
15%
10%
HH without
Non-remittance HH childrenRemittance
or elderly HH 0-14 15-24 25-34
HH with children 10%
5% 35-44 45-54 55-64
HH
HH without children or elderly
with elderly 0-14
65+ 15-24 25-34
HH with children 5%
0% 35-44 45-54 55-64
HH with children and elderly
HH with elderly
Elderly-only HH 2007 2008
65+ 2009 2010 2011 2012 2013 2014
HH with children and elderly 0%
Elderly-only
Source: World Bank calculationsHHbased on the HBS. 2007 Bank
Source: World 2008calculations
2009 2010 based2011
on the 2012
HBS. 2013 2014
The poor and bottom 40: less stock of physical and human capital and less access to services
The
The poor
Thepoor and
poor and bottom
havebottom 40:
40: less
less accessless stock of
of physical
stockservices.
to basic physical and
Theyandhuman
less capital
human
have and
capital
access to lessless
and
housing access
accessto services
utilities, to services
cold and
hot
The water,
Thepoor sewerage,
poorhave
havelessless central
access
access gas, and
to basic
to basic sanitation
services.
services. facilities
Theyless
They have have(Figure 61 andtoFigure
lesstoaccess
access housing housing62).cold
utilities, This may
utilities,
and hotpartly
cold and sewerage,
water,
derive
hot from
water, the fact
sewerage, that households
central gas, and at the bottom
sanitation of
facilitiesthe distribution
(Figure 61 and frequently
Figure 62).live in
This rural
may areas
partly
central gas, and sanitation facilities (Figure 61 and Figure 62). This may partly derive from the fact that households
atwith
the less
derive developed
from
bottom the
of the utility services.
factdistribution
that households at thelive
frequently bottom of areas
in rural the distribution frequently
with less developed live services.
utility in rural areas
with
Figureless
61.developed utility services.
Living conditions and access to Figure 62. Living conditions and access to
utilities,
Figure 61. poor
Living conditions and access to utilities,
Figure 62. bottom
Living40conditions and access to
utilities, poor utilities, bottom 40
Poor
Telepho
B40
Telepho
Heatingne ne
Heatingne ne
Non-poor
Poor
Telepho
T60
B40
Telepho
Poor
Non-poor B40
T60
Non-poor
Poor 2007 T60 2007
Heating
B40
Heating
2014
2007 2014
2007
Poor
Non-poor B40
T60
ToiletToilet
insideinside
ToiletToilet
insideinside
2014 2014
Non-poor
Poor T60
B40
Poor
Non-poor B40
T60
Sewage
Sewage
Non-poor
Poor T60
B40
Sewage
Sewage
Poor
Non-poor B40
T60
waterwaterwaterwater
waterwaterwaterwater
Hot Hot
Hot Hot
Non-poor
Poor T60
B40
Pumped
Poor
Non-poor
Pumped
B40
T60
Non-poor
Pumped
Poor T60
Pumped
B40
Non-poor 0% 20% 40% 60% 80% 100% T60 0% 20% 40% 60% 80% 100%
Source: World Bank 0% 20% based
calculations 40% on60% 80% 100%
the HBS 0%
Source: World 20% 40%
Bank calculations based on60%
the HBS80% 100%
Source: World Bank calculations based on the HBS Source: World Bank calculations based on the HBS
39 World Bank (2016c). 25

40
40
The poor
Poverty andand
Sharedbottom 40 have
Prosperity fewer assets.
in Moldova: ProgressFamilies at the top of the distribution live in bigger
and Prospects
houses. The average area of apartments and houses overall and per capita is greater among the top
The poorthe
60 and and bottomrelative
nonpoor 40 havetofewer assets. Families
the bottom 40 and the poor.
at the top ofNonpoor households
the distribution have
live in an average
bigger houses. The
average area ofmore
of 23 percent apartments and houses
home area. In ruraloverall and pernearly
areas where capitaallishouseholds
greater amongownthe topowners
land, 60 and ofthelarger
nonpoor
relative to the bottom 40 and the poor. Nonpoor households have an average
plots are less poor. The nonpoor own an average of 51 percent more farmland than the poor. of 23 percent more home area.
In rural areas where nearly all households own land, owners of larger plots are less poor. The nonpoor own
The
an poorofand
average bottommore
51 percent 40 have much
farmland thanless
the educational
poor. attainment. The average educational
attainment is quite high in Moldova, as in most of former central planning economies; only 1
The poorofand
percent bottom
people ages4012have
andmuch
aboveless educational
report they do not attainment.
have primary The average educational
education. attainment
Nonetheless, the is
quite high in Moldova, as in most of former central planning economies; only 1 percent of people ages 12
level of education varies widely across the population. The bottom 40 and the poor tend to have
and above report they do not have primary education. Nonetheless, the level of education varies widely
primary
across theorpopulation.
secondary The education
bottomat40most,
and thewhile thetend
poor top to
60have
and primary
the nonpoor more commonly
or secondary educationhaveat most,
tertiary education (Figure 63 and Figure 64 ). Similarly, the heads in vulnerable households
while the top 60 and the nonpoor more commonly have tertiary education (Figure 63 and Figure 64). Similarly, are usually
less heads
the well educated (annexhouseholds
in vulnerable A). For example,
are usuallypeople
less inwell
households
educated with heads
(annex A). who have at least
For example, peoplea in
households with headsdegree
college or university who have
areat27least a college
percent lessorlikely
university
to be degree
poor. are
This27inequality
percent less in likely to be poor.
educational
This
attainment may be a result of a lack of affordability in education. The poor spent 15 percent ofThe
inequality in educational attainment may be a result of a lack of affordability in education. thepoor
spent 15 percent of the expenditure of the nonpoor on education in 2014, although there are more children
expenditure of the nonpoor on education in 2014, although there are more children in poorer
in poorer households (see above). This inequality in education significantly affects people at the bottom of
households
the (seeby
distribution above). Thisthem
rendering inequality in education
less competitive onsignificantly affects people at the bottom of the
the labor market.
distribution by rendering them less competitive on the labor market.
Figure 63. Level of education of among poor Figure 64. Level of education of among bottom 40
and nonpoor adult population and top 60 adult population
28% 27% 27% 23%

48% 44% 41%
51% 19%
21% 19% 20%
21% 20%
20% 20%
51% 53% 53% 58%
32% 35% 38%
28%

2007 2014 2007 2014
Tertiary Secondary Primary Tertiary Secondary Primary
People
Peopleatatthethebottom
bottom of of
thethe
distribution
distributionhavehave
less less
access to health
access care. Health
to health outcomes
care. Health are poorare
outcomes across
the
poorcountry.
across The
the number
country.ofThe people with of
number various
peopledegrees of disability
with various or chronic
degrees disease
of disability orischronic
equallydisease
distributed
between
is equally distributed between the bottom 40 and the top 60. Self-rated health status isbottom
the bottom 40 and the top 60. Self-rated health status is not necessarily worse among the not 40
and the poor relative to the top 60 and the nonpoor, although the share of the population that reports they
necessarily
are worsea bad
experiencing among the bad
or very bottom
life is 40
twoand thegreater
times poor among
relativetheto bottom
the top4060 and the
relative nonpoor,
to the top 60, and
the gap is even wider among the poor relative to the nonpoor (Figure 65). Nonetheless, the poor isspend
although the share of the population that reports they are experiencing a bad or very bad life two less
times
on greater
health care.among the bottom
The poor spent 2740percent
relativeoftothe
theexpenditure
top 60, and of thethe
gapnonpoor
is even wider among
on health the poor
in 2014. Higher
spending
relative toonthehealth
nonpooris not(Figure
always65positive, but, given
). Nonetheless, the that
poorthe poorless
spend andonthe nonpoor
health care.have
The apoor
similar health
spent
profile,
27 percent of the expenditure of the nonpoor on health in 2014. Higher spending on health is not can
it does offer an indication of the quality of health services to which the poor have access and
afford. One-quarter of the socially vulnerable working-age population has, for instance, no adequate access
always positive, but, given that the poor and the nonpoor have a similar health profile, it does offer
to health care services.40 This is partly explained by the lower coverage of medical insurance among these
an indication
vulnerable of the quality
population of health
categories; only services
70 percent to of
which the poor
the poor havehave access
medical and cancompared
insurance, afford. One- with 80
percent of the nonpoor. This has important implications for the burden of out-of-pocket (OOP) to
quarter of the socially vulnerable working-age population has, for instance, no adequate access health
spending (Box 3).
41
40 Molodikova (2008).
26
health care services.40 This is partly explained by the lower coverage of medical insurance among
these vulnerable population categories; only 70 percent of the poor have medical insurance,
compared with 80 percent of the nonpoor. This has important implications for the burden of out-
of-pocket (OOP) health spending (Box 3). Poverty and Shared Prosperity in Moldova: Progress and Prospects
Figure 65. Population, by health status

80%
2014 2007
60%
40%
20%
0%
Non-poor Poor Non-poor Poor Non-poor Poor Non-poor Poor
Bad health Disabled Chronic disease Medical insurance
Box 3. Out-of-Pocket Health Spending

The poorer segments of Moldovan society—the bottom quintile—may appear to be more well protected
fromBox 3. Out-of-Pocket
health-related shocks because Healththey are Spending
less likely to incur OOPs health fees and face catastrophic health
expenditures. This conclusion would be mistaken, for two main reasons.
The poorer segments of Moldovan society—the bottom quintile—may appear to be more well
First, inpatient-outpatient
protected from health-related service use is
shocks two times
because lower
they are lessamong
likely tothe bottom
incur OOPs20health
households
fees andthan face
among the top health
catastrophic 20; indeed, it is lowestThis
expenditures. among the former.
conclusion While
would be the inequalities
mistaken, in outpatient
for two service use in
main reasons.
2008 were somewhat reduced in the following five years, outpatient-inpatient service utilization usage rates
were still inpatient-outpatient
First, strongly positively correlated service withuse isthe twolevels
timesoflower
household
amongconsumption,
the bottom income, and wealth.
20 households than
amonginthe
Similarly, top according
2012, 20; indeed, to itthe Multipleamong
is lowest Indicator Cluster Surveys,
the former. While the theinequalities
bottom 20 in among womenservice
outpatient were
fouruse in 2008
times morewere
likelysomewhat reduced in
to forgo antenatal theduring
care following five years,
pregnancy and, outpatient-inpatient
if they sought care, were service utilization
5.5 times more
usage
likely to rates
receive were still strongly
inadequate antenatalpositively correlated
supervision, that with the than
is, less levelsfour of household consumption,
antenatal visits. Obviously, income,
such
and wealth.
behavior Similarly,
negatively affects in 2012, according
maternal health outcomes,to the and,Multiple Indicator Cluster
as a consequence, Surveys,
the bottom the bottom
20 among women 20
wereamong
2.7 timeswomen more were four
likely timesin more
to stay likely to
the hospital forgopostpartum
longer antenatal because
care during pregnancy
of delivery and, if they
complications. In
soughtrelative
addition, care, were
to the5.5 times
top more
20, they likely atoprobability
showed receive inadequate
of visiting antenatal supervision,
a health provider that that
after birth is, less
wasthan0.6
four antenatal visits. Obviously, such behavior negatively affects maternal
times lower. These findings highlight that the poorest segments of the population use health services the least health outcomes, and, as a
andconsequence,
frequently forgo the bottom
treatment 20 when
amonginwomen were because
need partly 2.7 timesofmore a lack likely to stay ininsurance
of adequate the hospitaland longer
other
postpartum
financial barriers,because
which thus of delivery complications.
have a negative In addition,
effect on health outcomes. relative to the top 20, they showed a
probability of visiting a health provider after birth that was 0.6 times lower. These findings highlight
Second,
that the because
poorestpoorersegmentshouseholds live close to
of the population usethe poverty
health line the
services and least
experience poorer living
and frequently forgo
standards,
treatmenteven when relatively
in need lowpartly health-related
because of a OOP lack ofpayments
adequatecan push them
insurance into poverty.
and other financial In figure
barriers,
B3.1 (the thus
which Pen Parade), the smooth
have a negative effect lineonalong
health theoutcomes.
top represents pre-OOP expenditure consumption levels,
from the poorest to the richest individuals who reported positive OOP expenditures for medical services.
Consumption
Second, because levels are measured
poorer on the vertical
households axis astomultiples
live close the povertyof thelinepoverty
and line. The Pen poorer
experience Parade shows
living
thatstandards,
approximately even relatively low health-related OOP payments can push them into poverty. Inline
8 percent of those who reported medical expenses were living below the poverty figurein
2013.
B3.1The (thevertical lines show
Pen Parade), the amounts
the smooth of OOP
line along expenditures
the top representsfor medicalexpenditure
pre-OOP services reported by the
consumption
individuals
levels, from interviewed.
the poorest The lines
to the show that the
richest net consumption
individuals of medical
who reported services
positive OOPwereexpenditures
below the pre- for
OOP consumption
medical services.line for all households.
Consumption levels areSome people who
measured on thestarted off above
vertical axis asthemultiples
poverty line in the
of the first
poverty
andline.
secondThepoorest quintiles
Pen Parade fell below
shows the poverty line8aspercent
that approximately a result of
of medical
those who expenditures.
reported Somemedicalpeople who
expenses
werewere living
already below
below thethe poverty
poverty lineline
hadinto2013.
pay forThemedical
verticalservices
lines show
and, as thea amounts
result, fellofdeeper
OOP expenditures
into poverty.
OOP for payments
medical services
are mostreported
prevalent by among
the individuals
the richest interviewed.
population The lines show
segments. Higher thatOOP
the net consumption
spending by the
of medical services were below the pre-OOP consumption line for all households. Some people who
started off above the poverty line in the first and second poorest quintiles fell below the poverty line
40 Molodikova (2008).
as a result of medical expenditures. Some people who were already below the poverty line had to pay
for medical services and, as a result, fell deeper 42 into poverty. OOP payments are most prevalent
among the richest population segments. Higher OOP spending by the rich signals that people are
using higher incomes to purchase better access and higher-quality services.
27
rich signals that people are using higher incomes to purchase better access and higher-quality services.
Figure B3.1. Effects of OOP health payments on household consumption, 2013
Figure B3.1. Effects of OOP health payments on household consumption, 2013
8
pre-OOP consumption
post-OOP consumption
6
smultipleofPL
4
Consumptiona
0
0 .2 .4 .6 .8 1
Cumulative proportion of population, ranked from poorest to richest
Source: Data of the 2007–13 HBS.
Source: Data of the 2007–13 HBS.
Moreover, the health care financing system is failing to provide protection from catastrophic health
Moreover,
payments the health
and, care financing
consequently, fromsystem is failing to provide
impoverishment protection
mainly among from
rural catastrophic
residents health payments
and residents of the
northern and southern regions. Indeed, in 2007–13, especially regional inequalities, although inequalities
and,
also consequently,
exist betweenfrom
urbanimpoverishment mainly among
and rural locations, widened,ruralandresidents and residents
geographical of thebecame
equity gaps northernmoreand
southern regions.
pronounced. Indeed,
Along within health
2007–13, especiallyissues,
financing regional inequalities,
these although
inequalities may inequalities also ofexist
arise because between
a lack of
information and awareness or because of the inadequacy of a supply network and other supply-side factors.
urban and rural locations, widened, and geographical equity gaps became more pronounced. Along with
health
Source:financing issues,
Adapted from Worldthese
Bank inequalities
2015b. may arise because of a lack of information and awareness or because
of the inadequacy of a supply network and other supply-side factors.
Source: Adapted
Alternative from World
measures of Bank 2015b.focusing on nonmonetary indicators show that the incidence of poverty
poverty
is much greater and more persistent than measured by monetary indicators. Although Moldova relies on
monetary consumption–based measures, using nonmonetary welfare measures can provide additional
Alternativeonmeasures
information of poverty
trends in living focusing
standards, on in
particularly nonmonetary
a country in indicators show have
which remittances that fueled
the
incidence growth.
consumption of poverty
This is much
initial greater
attempt and more persistent
at a multidimensional povertythan measured
measure by monetary
for Moldova involves the
construction of an index based on several dimensions of well-being to explore whether and the extent to which
indicators.
individuals and Although
households Moldova relies inonthese
face deprivations monetary consumption–based
areas.41 The measures,
dimensions considered in the indexusingare
weighted equally and relate to health, education, labor, and housing following the international literature
nonmonetary welfare measures can provide additional information on trends in living standards,
(Table 2). Each dimension is assessed through indicators chosen to reflect the material or human capital
particularly that
deprivations in a undermine
country in which remittances
a person’s capacityhave fueleddecent
to enjoy consumption growth.
social and Thisliving
economic initial standards.
attempt
Individuals are considered multidimensionally poor if they live in households deprived in more than one-
at a ofmultidimensional
third poverty measure
the weighted indicators. Other for Moldova indicators,
dimensions, involves theandconstruction
thresholdsofcould
an index based onin
be explored
several dimensions
alternative ways to defineof the
well-being to exploremeasure.
multidimensional whether and the extent to which individuals and
households face deprivations in these areas.41 The dimensions considered in the index are weighted
equally and relate to health, education, labor, and housing following the international literature
(Table 2). Each dimension is assessed through indicators chosen to reflect the material or human
41 Using the Alkire and Foster (2011) methodology.
28
capital deprivations that undermine a person’s capacity to enjoy decent social and economic living
standards. Individuals are considered multidimensionally poor if they live in households deprived in
Table 2. Multidimensional poverty index: dimensions and indicators

Weight Dimension Indicator Description
1/4 Health Bad health At least one household member reports bad to very bad health
status
No insurance At least one household member is without health insurance
1/4 Education Low education, working age There is no working age—15–56 among women and 15–62
Weight Dimension Indicator among men—householdDescription member with secondary education or
1/4 Health Bad health more member reports bad to very bad health status
At least one household
No insurance
Behind in compulsory At school-
least one household
At least member
one childis ages
without health
12–15 hasinsurance
not completed primary school
1/4 Education Low education,
ing, schoolworking
age There is no working
or, agesage—15–56
15–18, has among women andlower
not completed 15–62secondary
among school
age men—household member with secondary education or more
1/4 Employment Labor force participation, Active ratio is less than 0.5 among working-age members
Behind in compulsory At least one child ages 12–15 has not completed primary school or,
working age
schooling, school age ages 15–18, has(15–56 among women
not completed and 15–62
lower secondary among men)
school
1/4 Employment LaborUnemployment and Active
force participation, underem- At least
ratio is less than 75
0.5 percent of active working
among working-age membersage(15–56
members (15–56
ployment,
working age working age
among womenamong and 15–62womenamong andmen)
15–62 among men) are unemployed or
Unemployment and At least 75 percent of active working
underemployed age members
(working less than(15–56 among
40 hours a week but want to
underemployment, women and 15–62 workamong
more)men) are unemployed or underemployed
working age (working less than 40 hours a week but want to work more)
1/4 Housing House material The house is not made of brick or stone
1/4 Housing House material The house is not made of brick or stone
Living
Living space space Living space is Living space is insufficient
insufficient
ToiletToilet
deprivation
deprivation There is no indoor toilet
There is no facility
indoor toilet facility
Heating There is no heating, or heating is provided by coal, wood stove, or
Heating There is no heating, or heating is provided by coal, wood stove,
other solid materials
Sewerage Household lacks or any
other solidtomaterials
access a sewerage system
WaterSewerage Household lacks a water
Household connection
lacks any access to a sewerage system
Water Household lacks a water connection
The multidimensional poverty index reveals that 24 percent of the population was poor in
2014.multidimensional
The This represented small improvement
poverty fromthat
index reveals the 31
24 percent
percentinof2007. In this period,
the population wasthose
poorwhoin 2014. This
remained multidimensionally poor were deprived in more dimensions of the
represented small improvement from the 31 percent in 2007. In this period, those who remainedindex (higher intensity),
multidimensionally poor were
especially during the global crisis deprived in more
and the 2012 drought.dimensions
42
of the index
If multidimensional (higher
poverty intensity),
is defined by a especially
during
stricterthe global that
criterion, crisisis,and the 2012that
households drought. 42
If multidimensional
have deprivations in more thanpoverty is defined
50 percent byweighted
of the a stricter criterion,
that
index indicators, the result might be considered a measure of severe poverty. The shareindicators,
is, households that have deprivations in more than 50 percent of the weighted index of the
result might be considered a measure of severe poverty. The share
households living in severe poverty remained stable at around 8 percent (Figure 66). of households living in severe poverty
remained stable at around 8 percent (Figure 66).
Similar to monetary poverty, multidimensional poverty tends to be concentrated in rural
Similar
areas, andto monetary
the rate ispoverty, multidimensional
much higher in areas outsidepoverty tends to
Chișinău. be concentrated
Nonetheless, althoughin rural areas, and the
monetary
rate is much higher in areas outside Chișinău.
poverty is most extensive in the south, the region has made significant progress in multidimensional extensive
Nonetheless, although monetary poverty is most
in the south,
poverty. the region
Almost 100,000has made significant
people progress out
have moved in multidimensional
of multidimensional poverty.poverty.
Almost 100,000
The people
have moved out of multidimensional poverty. The multidimensional poverty
multidimensional poverty rate is now lower in the south than in the north and central regions rate is now lower in the south
than in the
(Figure 67).north and central regions (Figure 67).
Figure 66. Nonmonetary indicators Figure 67. Nonmonetary poor, by region
40% 50% 500,000 50%
30% 48%
400,000 40%
46%
20% 300,000 30%
44%
10% 42% 200,000 20%
0% 40% 100,000 10%
20072008200920102011201220132014
- 0%
Non-monetary poverty North Central South Chisinau
Severe non-monetary poor
Number of poor (2007) Number of poor (2014)
Intensity (right axis)
Poverty rate (2007) Poverty rate (2014)
42 Intensity is the weighted average of the deprivations in the index.

42 Intensity is the weighted average of the deprivations in the index.
29
44
Deprivations
Poverty in health
and Shared and housing
Prosperity conditions
in Moldova: Progressare
andparticularly
Prospects high. More than 60 percent of
Deprivations
the populationinfaced
health and housing
deprivations conditions
in these are particularly
indicators high. More
during the period than 60(Figure
considered percent68).
of
Deprivations
the population
However, in health
there faced and housing
deprivations
have been conditions are
in thesein indicators
small advances particularly
during the
these dimensions high. More
period considered
as households than
have more 60
(Figure percent
access68).
to of the
population
However,
health facedhave
there
insurance, deprivations
beenwater,
pumped in advances
small these
and indicatorsandduring
in these
sewerage, the period
dimensions considered
as households
their contribution (Figure
have more 68).
to multidimensional However,
access to
poverty there
have been
health
has small
insurance,
decreased advances
pumped
(Figure in these dimensions as households have more access to health insurance,
69). water, and sewerage, and their contribution to multidimensional poverty pumped
water,
has decreased (Figure 69). their contribution to multidimensional poverty has decreased (Figure 69).
and sewerage, and
Figure 68. Share of people deprived in each Figure 69. Contribution of each dimension to
dimension
Figure 68. Share of people deprived in each multidimensional povertyof each dimension to
Figure 69. Contribution
dimension
80% multidimensional poverty
2007 2014 14% 17%
80% 7% 10%
60% 14% 17%
2007 2014 7%
36%
60%
40% 10%
35%
36% 35%
40%
20% 43% 38%
20%
0% 43% 38%
0% 2007 2014
2007 Health
Housing Education 2014
Employment
Housing Health Education Employment
The majority of the multidimensionally poor are not poor according to the consumption-
The majority
based povertyofmeasure.
the multidimensionally
The poor identified poorbyare
thenot poor according
nonmonetary to the
indicators andconsumption-
the monetary
The majority of the multidimensionally poor are not poor according to the consumption-based poverty
based poverty
indicators were measure.
identical in The
only poor
12.7 identified
percent of by
the the nonmonetary
possible cases in
measure. The poor identified by the nonmonetary indicators and the monetary indicators indicators
2007, and, and
given the monetary
that were identical in
indicators
poverty
only were identical
12.7declined
percent in onlythis
significantly,
of the possible 12.7
casespercent
overlap of the
in 2007, and,possible
represented cases
onlythat
given in 2007,ofand,
5.5 monetary
percent given
cases
poverty that monetary
indeclined
2014. Atsignificantly,
least this
poverty
half the declined
reduction significantly,
in monetary this
povertyoverlap
aroserepresented
among only
people 5.5
who percent
were not of cases in 2014.
multidimensionally
overlap represented only 5.5 percent of cases in 2014. At least half the reduction in monetary poverty arose At least
poor,
half thepeople
whereas
among reduction
whoin
the share ofmonetary
were those poverty
who werearose
not multidimensionally among
poor,people
multidimensionally
whereaswho thewere
poor, butnot
share not multidimensionally
poorwho
of those by were poor,
the monetary
multidimensionally
poor, but
whereas was
measure not poor by
the constant the
share of (Figuremonetary
those who measure was
werepersistence
70). This constant
multidimensionally (Figure 70).
poor, but not
of multidimensional This persistence
poorreflects
poverty of multidimensional
by thelong-lasting
monetary
poverty
measurereflects
was in
deprivations long-lasting
constant
living (Figuredeprivations
standards 70).that
Thismay in living
persistence
stem fromstandards
of lack ofthat
amultidimensional maytopoverty
access stem from
markets a lack
reflects
and of access
for to markets
long-lasting
services,
and services,
deprivations
example, for example,
in livinghealth,
education, education,
standards that may
and other health, and
stemrather
services, other
from than
a lack services,
of access
a lack rather than
to markets
of income. a
There and lackservices, fora There is,
of income.
is, nonetheless,
nonetheless,
strong a strong
example,correlation
education, correlation
health,
between and between
other multidimensional
services,
multidimensional rather
povertythan
anda lack poverty ofand
of income.
rankings rankings of subjective
There is,well-being
subjective nonetheless, anda well-being
and consumption,
strong correlation
consumption, which
whichbetween suggests that
suggestsmultidimensional richer
that richer householdshouseholds
povertyandand and people
rankings
people who of who enjoy
subjective
enjoy higher living
well-being
higher living standards do
and
standards
appreciate their advantages in life (Figure 71).
consumption,
do which
appreciate their suggests that
advantages in lifericher households
(Figure 71). and people who enjoy higher living standards
do appreciate their advantages in life (Figure 71).
Figure 70. Overlap, nonmonetary and monetary Figure 71. Nonmonetary poverty, by subjective
poor
Figure 70. Overlap, nonmonetary and monetary well-being and consumption
Figure 71. Nonmonetary quintiles
poverty, by subjective
poor well-being
50% and consumption quintiles
56% 40%
50%
70%
56% 30%
40%
70%
13% 20%
30%
19% 6%
13% 18% 10%
20%
13%
19% 6%
6%
18% 0%
10%
13%
2007 2014
6% Bad 2 3 4 Good
0%
Poor
2007(both) 2014 Bad 2 Quintile
3 4 Good
Non-monetary poor, monetary non-poor
Poor (both) Quintile
Monetary poor, non-monetary non-poor
Non-monetary poor, monetary non-poor Subjective wellbeing Consumption per capita
Non-poor (both)
Monetary poor, non-monetary non-poor
Source: WorldNon-poor (both) based on the HBS.
Bank calculations Subjective
Source: World Bankwellbeing Consumption
calculations based per capita
on the HBS.
Important and increasing risks
45 to sustainable progress persist
45
Fiscal pressure because of aging and weak labor markets will limit the role of public transfers
The population of Moldova is shrinking and aging rapidly. Driven by declining fertility and accelerating
emigration among the young population, the population shrunk by 16 percent in 2000–15. This is equivalent
to a reduction of around 670,000 people. The share of the working-age population (ages 15–64) rose from
66 percent to 71 percent during the period, creating a demographic dividend for the economy. This occurred
30
The population of Moldova is shrinking and aging rapidly. Driven by declining fertility and
accelerating emigration among the young population, the population shrunk by 16 percent in 2000–
15. This is equivalent to a reduction of around 670,000 people. The share of the working-age
population (ages 15–64) rose from 66 percent to 71 percent during the period, creating a
demographic dividend for the economy. This occurred mainly because of a rather rapid decline in
mainly because of a rather rapid decline in the share of the population below working age, from 24 percent
the2000
in sharetoof17thepercent
population belowThe
in 2015. working
shareage, frompopulation
of the 24 percent above
in 2000working
to 17 percent in 2015.
age (ages The over) rose
65 and
moderately, from 10 percent in 2000 to 12 percent in 2015 (Figure 72). As a result, both the childin
share of the population above working age (ages 65 and over) rose moderately, from 10 percent dependency
2000 to 12 percent in 2015 (Figure 72). As a result, both the child dependency ratio and
ratio and the total dependency ratio declined during the period, while the old-age dependency ratio rose the total
dependency
slightly, ratio declined
providing favorableduring the period,
demographic while the for
conditions old-age dependency
economic growth.ratio rose slightly,
However, the situation is
expected
providingeventually
favorable todemographic
reverse as large cohorts approach
conditions for economicretirement
growth. age.However,
By 2030, the
the share of theiselderly will
situation
have increased rapidly to 17 percent, more than the share of children.
expected eventually to reverse as large cohorts approach retirement age. By 2030, the share of the
elderly will have increased rapidly to 17 percent, more than the share of children.
Figure 72. Demographic composition, 2000–30
5,000 Children Working age Elderly
4,500
Children Working age Elderly
4,000
4,000 [CELLRANGE]
24%
Thousand people
3,500
Thousan people
Thousand people
17%
3,000
3,000 [CELLRANGE] 15%
2,500
2,000
66% [CELLRANGE]
[CELLRANGE] 71 %
1,500
1,000
2,000 [CELLRANGE]
67%
500 10% [CELLRANGE]

12%
‐ 1,000 17%
[CELLRANGE]
2000
[CELLRANGE]
2015 2030
- [CELLRANGE]
2000 2015 2030
Source: World Bank calculations based on World Population Prospects: The 2015 Revision (database), Population Division,
Department of Economic and Social Affairs, United Nations, New York, http://esa.un.org/unpd/wpp/.
Note: The population forecast is based on the medium fertility, normal mortality, and normal migration scenario, which assumes
fertility rates follow a trend from high to low, then fluctuate around the replacement rate (2.1 children per woman), while life
expectancy at birth and migration follow historical trends in each country. The estimates do not include Transnistria.
IfIfthese
thesetrends
trends continue,
continue, Moldova
Moldova willstark
will face facedemographic
stark demographic
challengeschallenges affecting in growth
affecting prospects
prospects
and sharedinprosperity.
growth and Theshared prosperity.
population The population
is expected to shrink isbyexpected
another to
25 shrink by or
percent, another 25
1.2 million people,
by 2060. or
percent, Because the reduction
1.2 million people, by will
2060.beBecause
concentrated amongwill
the reduction thebeyoung population,
concentrated among Moldovan
the youngsociety will
also be much older (Figure 73). The share of the elderly is anticipated to increase
population, Moldovan society will also be much older (Figure 73). The share of the elderly from 12 percent
is to 30
percent in 2015–60,
anticipated to increaseand
fromwomen ages to6030and
12 percent 70 will
percent account and
in 2015–60, for women
a majorages
segment
60 andof70the
willpopulation.
Accelerating
account for a major segment of the population. Accelerating population aging is likely to putand shared
population aging is likely to put pressure on the progress in economic growth
prosperity.
pressure on the progress in economic growth and shared prosperity.
Figure 73. Age-gender pyramid, 2015–60

Male Female
46
People, 1,000s
Low labor force participation and a shrinking working-age population have led to a large
31
dependency ratio. Moldova has one of the lowest employment rates in the region. It is third after
Bosnia and Herzegovina and Kosovo. This is driven by a persistent fall in labor force participation
among both men and women (see above). As a result, the country has an exceptionally high
People, 1,000s
Low
Low labor
labor force
force participation
participation andand aa shrinking
shrinking working-age
working-agepopulation
population have haveled
ledtotoa alarge
largedependency
ratio. Moldova
dependency has one
ratio. of thehas
Moldova lowest
one employment
of the lowest rates in the region.
employment It is
rates in thethird afterItBosnia
region. is thirdand
afterHerzegovina
and Kosovo. This is driven by a persistent fall in labor force participation among both men and women (see
Bosnia and Herzegovina and Kosovo. This is driven by a persistent fall in labor force participation
above). As a result, the country has an exceptionally high dependency ratio. On average, there are 1.6 inactive
among for
adults both
each men andadult
active women (see74).
(Figure above). As a result, the country has an exceptionally high
dependency ratio. On average, there are 1.6 inactive adults for each active adult (Figure 74).
Figure 74. Adult (15+) dependency ratio: inactive population relative to active population, 2013
1.6
1.6
1.4
1.4
1.2
1.2
1.0
1.0
0.8
0.6
0.8
0.4
0.6
0.2
0.4
0.0
Russian…
United…
Bosnia and…
0.2
France
Hungary
Italy
Denmark
Portugal
Austria
Slovenia
Kyrgyzstan
Romania
Bulgaria
Serbia
Malta
Croatia
Kazakhstan
Sweden
Estonia
Tajikistan
Cyprus
Uzbekistan
Turkmenistan
Latvia
Germany
Spain
Czech Republic
Greece
Belarus
Belgium
Montenegro
Turkey
Moldova
Netherlands
Georgia
Armenia
Lithuania
Ireland
Finland
Slovakia
Poland
Ukraine
Luxembourg
Azerbaijan
Albania
Macedonia
0.0
Source: Bussolo, Koettl, and Sinnott 2015.
Given demographic
demographic aging agingandandthe labor
the market
labor marketsituation, sustaining
situation, sustainingthe the
pension system
pension involves a high
system
fiscal
involvesburden.
a high Pension
fiscal spending has risenspending
burden. Pension substantially. Thesubstantially.
has risen cost of pensions
The jumped from 5 percent to 8
cost of pensions
percent
jumped from 5 percent to 8 percent of GDP in 2002–14, which fueled the fiscal deficit of upThe
of GDP in 2002–14, which fueled the fiscal deficit of up to 1 percent of GDP. to 1spending is
relatively
percent ofgreater
GDP. Thethanspending
in manyisEuropean
relatively countries
greater thanthat
in are
manymore advanced
European in economic
countries that aredevelopment
more and
characterized by fewer problems in population aging, such as Croatia, Estonia, and the Slovak Republic.43
advanced in economic development and characterized by fewer problems in population aging, such
Because
shrinkingofworking-age
the rising population,
share of thetheelderly
pensionand shrinking
system dependencyworking-age
ratio—thepopulation, the pension system
number of pensioners
as Croatia, Estonia, and the Slovak Republic.43 Because of the rising share of the elderly and
dependency ratio—the
per contributor—is number
expected toofincrease
pensioners
fromper77 contributor—is
percent to a peak expected
of 108topercent
increaseinfrom 77 percent to a
2014–55
peak
(Figure 75). Labor migrants do not tend to contribute to the pension system, exacerbating the system,
of 108 percent in 2014–55 (Figure 75). Labor migrants do not tend to contribute to the pension
exacerbating
43decreasing the decreasing pension contribution rates. Given that inactivity and informality are expanding,
World Bank pension
(2016c). contribution rates. Given that inactivity and informality are expanding, fewer
fewer people will contribute
people will contribute to the
to the pension
pension system
system andthus
and thusundermining
underminingsystem
systemsustainability
sustainabilityand
and reducing
pension coverage of the retiree population (Figure 47 76).
reducing pension coverage of the retiree population (Figure 76).
Figure 75. Pension system dependency ratio, Figure 76. Pension coverage, population above
number of pensioners per contributor standard retirement age
110% 100%
90%
100%
80%
90% 70%
80% 60%
50%
70%
40%
60% 30%
2014
2018
2022
2026
2030
2034
2038
2042
2046
2050
2054
2058
2062
2066
2070
2014
2018
2022
2026
2030
2034
2038
2042
2046
2050
2054
2058
2062
2066
2070
Sources: World Bank 2016c; calculations based on PROST (Pension Reform Options Simulations Toolkit), World Bank; data of the
National Social Insurance House.
Thedeclining
The decliningpension
pension coverage
coverage andand replacement
replacement ratesrates
may may increase
increase theofrisk
the risk of old-age
old-age poverty. Pensions
play an important
poverty. Pensions role play in
an reducing
importantpoverty. They are poverty.
role in reducing particularly
Theyimportant in reducing
are particularly old-age
important in poverty.
Without
reducing old-age poverty. Without pensions, the poverty rate in Moldova would have increased by a a factor of
pensions, the poverty rate in Moldova would have increased by a factor of 11 overall and
14 among
factor of 11theoverall
elderly.and Pension
44
replacement
a factor of rates—the
14 among the elderly.44ratio of old-age
Pension pensions
replacement to the average
rates—the ratio of wage—are
already low and are on a declining trend because of shrinking contributions
old-age pensions to the average wage—are already low and are on a declining trend because (Figure 77 andof Figure 78).
shrinking
43 contributions
World Bank (2016c). (Figure 77 and Figure 78). Addressing this challenge requires broader reforms
and cannot rely on the government budget to bridge the gap between contributions and benefits.
32
Figure 77. Replacement rates, selected countries Figure 78. Replacement rates, 2013–2069
70 30%
60
The declining pension coverage and replacement rates may increase the risk of old-age
poverty. Pensions play an important role in reducing poverty. They are particularly important in
reducing old-age poverty. Without pensions, the poverty rate in Moldova would have increased by a
44
factor of 11 overall and a factor of 14 among the elderly.
Poverty Pension
and Shared replacement
Prosperity rates—the
in Moldova: ratio and
Progress of Prospects
old-age pensions to the average wage—are already low and are on a declining trend because of
Addressing this challenge
shrinking contributions requires
(Figure broader
77 and Figure reforms and cannot
78). Addressing rely on the
this challenge government
requires broaderbudget
reforms to bridge the
gap
andbetween contributions
cannot rely and benefits.
on the government budget to bridge the gap between contributions and benefits.
Figure 77. Replacement rates, selected countries Figure 78. Replacement rates, 2013–2069
70 30%
60
50 25%
40 20%
30
20 15%
10 10%
0
5%
0%
2013
2017
2021
2025
2029
2033
2037
2041
2045
2049
2053
2057
2061
2065
2069
2011 2030
Source: World Bank 2016c. Sources: World Bank 2016c; calculations based on PROST
(Pension Reform Options Simulations Toolkit), World Bank;
social reports.
Remittances: unsustainable drivers of poverty reduction and shared prosperity
Remittances are an unsustainable driver of Moldova’s economic growth. Remittance income
44 World Bank (2016c). 45
Remittances: unsustainable drivers of poverty reduction and shared prosperity
can be highly volatile, and this especially affects48 households that are highly dependent on them. A
Remittances
large share of the remittances received in Moldova are senteconomic
are an unsustainable driver of Moldova’s from the EU growth. 45
Remittance
and Russia. income can be
Remittances
highly
dipped significantly during the financial crisis of 2008–09 and have been decreasing since 2013share of the
volatile, and this especially affects households that are highly dependent on them. A large
remittances received in Moldova are sent from the EU and Russia. Remittances dipped significantly during
(Figure 79). Because of the slowdown in the economic activity of Russia beginning in 2014,
the financial crisis of 2008–09 and have been decreasing since 2013 (Figure 79). Because of the slowdown in
remittances to Moldova dropped by 30 percent in 2015. The biggest reduction was in the transfer of
the economic activity of Russia beginning in 2014, remittances to Moldova dropped by 30 percent in 2015.
rubles.
The The reduction
biggest impact of was
slowingrowth on remittances
the transfer of rubles.measured
The impact in U.S. dollars
of slow has been
growth driven by the
on remittances measured in
valuation
U.S. dollarseffects
has beenof driven
the appreciation of the effects
by the valuation dollar ofagainst the currencies
the appreciation of dollar
of the remittance-source
against the currencies
ofcountries (contributing
remittance-source 13.8 percentage
countries points 13.8
(contributing to the total decline
percentage in transfers
points in 2015),
to the total especially
decline the in 2015),
in transfers
ruble, as the
especially wellruble,
as byasthe
wellreduction
as by thein actual transfers
reduction in actual(16.2 percentage
transfers points). Many
(16.2 percentage households
points). Many households
depend
depend heavily
heavily ononremittance
remittanceincome
incomeforforconsumption;
consumption;so,so, lower inflows
lower inflowscan can
hamper suchsuch
hamper consumption.
Less
consumption. Less foreign currency income among households and domestic exporters because ofremittances
foreign currency income among households and domestic exporters because of declining
also fuels inflationary
declining remittances pressures, further affecting
also fuels inflationary the welfare
pressures, further of households.
affecting Remittance
the welfare flows are not likely
of households.
toRemittance
continue toflows are not likely to continue to expand at a rapid pace as in the past given the alreadyof Moldova
expand at a rapid pace as in the past given the already high share of the population
abroad and of
high share thethe
fact that second-generation
population of Moldova abroad migrants
and the may bethat
fact less second-generation
attached to their homemigrantscountry
may and thus
reduce their remittances.
be less attached to their home country and thus reduce their remittances.
Figure 79. Remittances to Moldova, 1995–2015
35 2500
30
2000
25
20 1500
15 1000
10
500
5
0 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Remittances (RHS) Remittances as a share of GDP (LHS)
Sources: World Bank Development Economics Prospects Group; 2015 data: Moldova Central Bank, World Economic Outlook Database,
International Monetary Fund, Washington, DC, http://www.imf.org/external/pubs/ft/weo/2011/02/weodata/index.aspx.
Volatility because of climate shocks is increasing, particularly among the poor and bottom 40
45
TheWorld Bank (2016b).
agricultural sector, critical to the livelihoods of the rural poor, is highly volatile.
33 are increasingly driving fluctuations in
Episodes of drought, the most recent in the summer of 2015,
agriculture valued added, household consumption, and overall GDP (Figure 80). A majority of farm
households are smallholders, who tend to be poorer and have less buffer against shocks. More than
Volatility because of climate shocks is increasing, particularly among the poor and bottom 40
The agricultural sector, critical to the livelihoods of the rural poor, is highly volatile. Episodes of drought,
the most recent in the summer of 2015, are increasingly driving fluctuations in agriculture valued added,
household consumption, and overall GDP (Figure 80). A majority of farm households are smallholders, who
tend to be poorer and have less buffer against shocks. More than one-third of all farm households reported
they faced difficulties in paying for the food needed to ensure decent nutrition among household members
over the previous year. The numbers are higher among subsistence farm households. Subsistence farm
households consume more than 99 percent of their farm production, while other smallholder farm
of their farm
households production,
consume around while other smallholder
80 percent. This means farm
thathouseholds consume
there is little around 80
left for income percent. 46
generation.
46
This means that there is little left for income generation.
Figure 80. Value added in agriculture and GDP growth, 2001–14
45
35
25
15
Percent
5
-5 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
-15
-25
GVA in Agriculture, y/y GDP growth, y/y
Source: World Bank 2016b, using World Bank estimates based on national accounts.
Thestructure
The structureofofincomes
incomesmean meanthe thepoor
poorandandthethe bottom
bottom 4040areare
moremore vulnerable
vulnerable toto various
various shocks. The
shocks.
poor and The poor40and
bottom bottom
depend more40 than
depend themore than and
nonpoor the nonpoor
the top 60 and onthe top 60 onincome,
agricultural agricultural
pensions, and
social assistance.
income, pensions,The
andhigh share
social of agricultural
assistance. The highincomes
share in
of overall household
agricultural incomes income—19.2 percent among the
in overall household
poor and 22.9 percent
income—19.2 percentamong
amongthe thebottom
poor and40—make these incomes
22.9 percent among more volatile 40—make
the bottom and vulnerable theseto external
factors,
incomes such as weather
more conditions
volatile and vulnerableandtofood pricefactors,
external fluctuations.
such asAmong
weather farm households,
conditions the average
and food price nonpoor
household
fluctuations. Among farm households, the average nonpoor household has 2.8 sources of income, and many
has 2.8 sources of income, while the average poor household has 2.3 sources of income,
poor
whilehouseholds
the averagerely
poor almost exclusively
household has 2.3onsources
one income source.
of income, andThe relative
many poorimportance
households of the
rely various income
almost
sources in total income is revealed through the application of a Hirschman-Herfindahl index.47 Across all
exclusively on one income source. The relative importance of the various income sources in total
years, poor households are characterized by a higher Hirschman-Herfindahl47index value, indicating a stronger
income is revealed through the application of a Hirschman-Herfindahl index. Across all years, poor
concentration of income streams in fewer sources.48 This also reflects the lack of nonfarm opportunities in rural
households
areas. are characterized
The slowdown in the riseby in anonagricultural
higher Hirschman-Herfindahl index value,
wages48 and the volatility indicating income,
of agricultural a stronger coupled with
concentration of income streams in fewer sources. This also reflects
limited employment growth, meant that the share of labor in income was declining among the poor and thethe lack of nonfarm
opportunities
bottom 40. Forinexample,
rural areas. Thethe
among slowdown
poor, theinshare
the rise in nonagricultural
of nonagricultural wages
labor incomeand the volatility
in total incomeof increased
agricultural income, coupled with limited employment growth, meant that
from 38 percent to 34 percent in 2007–14. Without fiscal support, the incomes of the poor and the the share of labor in bottom 40
cannot
incomegrow
was as they did
declining in 2007–14;
among the poor indeed,
and the they may even
bottom 40. Forcontract.
example, In contrast,
among the thepoor,
nonpoor
the shareand the top 60
have a healthier income
of nonagricultural labor composition.
income in totalThey rely increased
income more on direct
from 38 labor income
percent to 34and remittances.
percent in 2007–14.
Without fiscal support, the incomes of the poor and the bottom 40 cannot grow as they did in
Linked
2007–14;partly to climate
indeed, they mayshocks, fluctuations
even contract. in food
In contrast, theprices
nonpooraffectand the thepoor
top disproportionately.
60 have a healthier In 2014,
the poor spent 60 percent of their consumption expenditure
income composition. They rely more on direct labor income and remittances. on food, compared with 45 percent among the
nonpoor. Conversely, the nonpoor spent more of their consumption expenditure on services and durables
Linked81).partly
(Figure The same to patterns
climateare shocks, fluctuations
observed among the bottomin food
40 and prices
the top 60 affect
(Figurethe
82). poor
In recent years,
the prices of food have
disproportionately. Inrisen
2014,much more
the poor than60the
spent pricesof
percent of their
services
consumption ). These changes
(Figure 83expenditure on food,in food prices
are affectingwith
compared the 45
poor and the
percent bottom
among the40nonpoor.
much more, potentially
Conversely, the squeezing
nonpoor spent out spending
more of on other needs,
their
including health care and education, that are important for long-term
consumption expenditure on services and durables (Figure 81). The same patterns are observed well-being.
46 Möllers et al. (2016).
47 See Herfindahl (1950); Hirschman (1945, 1964).
48 Möllerset
46 Möllers etal.
al. (2016).
(2016).
47 See Herfindahl (1950); Hirschman (1945, 1964). 34
48 Möllers et al. (2016).
50
among the bottom 40 and the top 60 (Figure 82). In recent years, the prices of food have risen much
more than the prices of services (Figure 83). These changes in food prices are affecting the poor and
the bottom 40 much more, potentially squeezing out spending on other needs, including health care
and education, that are important for long-term well-being.
Figure 81. Composition of the consumption of Figure 82. Composition of the consumption of
the poor and nonpoor the bottom 40 and top 60
100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
2007 2014 2007 2014
Food Clothing Housing Services Other Food Clothing Housing Services Other
Figure 83. Consumer price indicators, year-on-year, 2007–15

20
15
10
Percent
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
-5
Foodstuff products Non-foodstuff products Services
-10
Source: World Bank calculations based on NBS data.
51
35
Conclusion
Moldova has made good progress in reducing poverty and boosting shared prosperity. However, the drivers
of this progress in the past are likely to exercise a much more limited role.
• Aside from increases in nonagricultural wages, pensions have been the biggest contributor to income
growth among the bottom 40, as well as to poverty reduction. However, pensions are not the most
efficient means to target the neediest. Moreover, given population aging, the shrinking workforce, and
currently low employment rates and worker productivity, increases in pension spending will be fiscally
unsustainable.49
• Remittances are volatile and are not likely to continue to grow at the high pace of the past given the
external context and the already high share of the population living abroad.
Strengthening domestic labor markets is thus becoming more critical in the effort to maintain the progress
toward reaching the twin goals of reducing poverty and boosting shared prosperity and to address the
problems associated with an aging population in a fiscally sustainable manner. The accompanying analysis,
“A Jobs Diagnostic for Moldova,” explores in more detail the main challenges facing the labor market and
the areas for eventual action. Addressing issues of governance, which have taken center stage in Moldova in
recent years, is critical to creating an environment in which the necessary reforms and private sector-led job
creation are possible.
Because of the large share of the population, particularly the poor and the bottom 40, in rural areas and in
the agricultural sector, ensuring that rural areas enjoy the proper conditions for the development of the
nonfarm and farm economies is key. The accompanying analysis, “Structural Transformation of Moldovan
Small-Holder Agriculture and Its Poverty and Shared Prosperity Impacts,” examines the main challenges in
the agricultural sector, focusing on the nature and potential or lack of potential in smallholder agriculture.
Policies to promote healthier labor markets need to take account of and address the structural challenges to
the extent possible, as follows:
• Aging: The country needs to prepare for the rapidly aging population. By 2060, the population is projected
to have dropped by 29 percent, while the share of the elderly (ages 65+) will have tripled to 30 percent.
Given the substantial migration, low fertility, and weak labor markets, the demographic dividend may
vanish before the country has reaped the benefits. This raises serious questions about the ability of society
and the economy to support a growing elderly population.50 Efforts to reduce old-age mortality,
accompanied by policies to improve education and health care and to promote active aging, can allow
people to work longer and contribute more to the economy.
• Regional disparities: The gaps in welfare and access to services across urban and rural areas and among
ethnic minorities call for more active engagement by the government to enhance the provision and
quality of services in remote areas. Failing to address these barriers would risk widening inequality and
undermining economic mobility and harmonization across the country. Improving the equitable access
49 World Bank (2016c) discusses the pension system and relevant options in depth.
50 World Bank (2016c) explores the challenges involved in aging in Moldova in depth.
36
to and the quality of education, particularly among the less well off, is also key to increasing productivity
and the opportunities to find jobs. Equity in access to services, including health care, without the
currently high OOP expenditures is also critical to permitting individuals to build up their human
capital.
• Significant vulnerability: The vulnerability to external and climate shocks seems to be increasing, and
this will affect more heavily those households dependent on the agricultural sector. The poor are more
highly exposed to such shocks. Mitigation and measures to help households adapt to climate shocks are
needed. Social assistance can also be improved. The targeting of social assistance has been enhanced
through the Ajutor Social and heating allowance programs, although they still represent a small share of
total spending and cover only 4 percent and 6 percent of the total population, respectively. There is
likewise scope for improvements within the overall expenditure envelope, including program
consolidation to provide room to expand the coverage of social assistance programs.
Previous analyses of poverty and equity in Moldova point to challenges similar to those discussed in this
report. More than a decade ago, a similar document identified challenges related to the lack of sufficient
investment in human capital accumulation by the poor, large spatial inequalities in living standards,
dependence on pensions, increasing inactivity, and dependence on subsistence agriculture, substantial
migration, and the poor coverage of social assistance.51 Addressing these challenges once and for all is critical
for sustainable growth, poverty reduction, and shared prosperity in coming years.
51 World Bank (2004).
37
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39
Annex A. Characteristics
of the poor and bottom 40
Table A.1. Headcount ratio and Gini, by location
2007 2014
Squared Squared
Poverty Poverty Poverty Poverty Poverty Poverty
headcount gap Gap Gini headcount gap Gap Gini
Total 25.8 5.9 2.1 29.8 11.4 1.5 0.3 23.4
Urban 18.4 3.6 1.1 29.4 5.0 0.5 0.1 22.7
Rural 31.3 7.6 2.8 28.4 16.3 2.3 0.5 21.6
North 30.4 6.9 2.3 27.1 11.6 1.6 0.4 21.6
Central 30.2 7.5 2.8 30.7 14.9 1.8 0.4 22.4
South 29.5 6.6 2.3 27.7 16.7 2.4 0.5 20.8
Chisinau 11.4 2.2 0.7 28.2 2.6 0.4 0.1 22.9
Source: World Bank calculations based on the HBS
Table A.2. Headcount ratio, by household and individual characteristics

2007 2014
Poverty Distribution Distribution Poverty Distribution Distribution
headcount of the Poor of Population headcount of the Poor of Population
Location
Urban 18.4 30.0 42.2 5.0 18.8 43.2
Rural 31.3 70.0 57.8 16.3 81.2 56.8
North 30.4 34.9 29.7 11.6 29.8 29.2
Central 30.2 33.2 28.4 14.9 36.7 28.1
South 29.5 21.9 19.2 16.7 28.0 19.1
Chisinau 11.4 10.0 22.8 2.6 5.5 23.6
Gender of the household head
Male 25.9 66.1 66.0 12.1 69.6 65.9
Female 25.7 33.9 34.0 10.2 30.4 34.1
Household head’s age
15-19 4.9 0.1 0.4 1.9 0.3 1.7
20-24 15.0 1.3 2.2 4.6 2.1 5.3
25-29 17.0 3.1 4.7 9.2 5.6 6.9
30-34 21.1 6.4 7.8 9.4 6.9 8.4
35-39 24.7 9.6 10.0 12.6 10.8 9.8
40-44 23.9 10.1 10.9 9.6 8.8 10.4
40
2007 2014
45-49 24.1 13.3 14.3 13.4 15.4 13.0
50-54 25.0 13.3 13.8 9.8 11.7 13.6
55-59 23.9 10.8 11.7 13.4 13.0 11.1
60-64 28.7 5.9 5.3 14.7 25.2 19.6
65+ 35.5 26.1 19.0
Household’s head education

Primary 41.4 40.4 25.2 21.1 42.0 22.7
Secondary 26.8 17.5 16.9 12.0 18.5 17.7
Tertiary 18.8 42.1 57.9 7.5 39.5 59.7
Age group
0-13 28.2 18.6 17.1 13.0 17.4 15.3
14-14 28.8 2.2 1.9 18.0 1.9 1.2
15-19 24.4 8.6 9.1 10.7 5.9 6.3
20-24 21.1 6.8 8.4 10.1 5.4 6.1
25-29 21.4 5.0 6.0 6.9 4.1 6.7
30-34 23.0 5.2 5.8 12.2 5.8 5.4
35-39 25.0 5.4 5.6 10.4 4.7 5.2
40-44 24.2 5.4 5.8 12.8 6.3 5.6
45-49 24.1 7.2 7.7 9.8 5.4 6.3
50-54 21.7 6.6 7.8 11.3 8.6 8.7
55-59 23.0 6.4 7.1 9.5 7.6 9.1
60-64 27.4 4.0 3.7 10.8 7.7 8.2
65+ 34.7 18.7 13.9 13.8 19.1 15.9
Education (adult 15+)
Primary 33.3 59.1 45.9 16.7 60.8 41.6
Secondary 24.4 15.7 16.7 11.4 16.3 16.3
Tertiary 17.4 25.2 37.5 6.2 22.9 42.0
Employment status (adult 15+)
Employed 22.0 47.5 54.5 9.6 49.5 56.8
Unemployed 34.7 4.4 3.2 16.3 4.1 2.8
Inactive 28.7 48.1 42.3 12.7 46.4 40.4
Number of children 0-14 years old
no children 23.7 46.4 50.7 10.6 52.8 57.0
1 22.6 22.6 25.8 8.0 16.1 23.0
2 29.6 20.2 17.6 15.0 20.5 15.6
3 or more
47.0 10.7 5.9 27.9 10.7 4.4
children
Household size
1 25.8 8.1 8.1 9.0 9.2 11.6
2 23.8 20.1 21.8 10.7 27.1 29.0
41
2007 2014
3 17.4 15.6 23.2 7.6 13.7 20.7
4 23.7 23.3 25.4 11.1 21.4 21.9
5 35.7 17.6 12.7 19.3 19.0 11.3
6 40.8 9.1 5.8 19.5 7.1 4.1
7 or more 53.0 6.1 3.0 20.8 2.5 1.4
Source: World Bank calculations based on the HBS
Table A.3. Welfare distribution, by country quintiles, location and household head characteristics
2007 2014
Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5
Location
Urban 12.3 16.5 19.3 23.6 28.3 9.8 14.9 19.5 25.1 30.8
Rural 25.6 22.6 20.5 17.4 14.0 27.8 23.9 20.3 16.1 11.9
North 22.4 23.0 21.8 19.4 13.5 20.1 21.4 22.9 20.5 15.1
Central 24.9 20.7 19.0 17.4 18.0 25.9 22.7 19.9 16.5 15.1
South 23.3 25.6 20.3 18.0 12.7 25.9 26.8 19.4 17.2 10.7
Chisinau 7.9 10.6 18.6 25.7 37.2 8.0 9.5 16.9 25.9 39.7
Gender of the household head
Male 20.7 19.9 20.1 20.8 18.5 21.0 19.9 20.1 19.8 19.3
Female 18.6 20.3 19.8 18.3 23.0 18.1 20.2 19.7 20.5 21.5
Household head’s age
15-19 4.9 2.4 14.5 14.8 63.4 19.9 5.2 0.0 24.2 50.7
20-24 11.7 12.2 11.9 17.6 46.6 9.2 8.2 16.2 20.4 46.0
25-29 16.6 16.2 17.7 17.5 32.0 17.6 10.5 20.4 19.3 32.2
30-34 21.0 16.9 25.8 15.6 20.7 20.0 16.3 20.3 20.9 22.6
35-39 26.1 20.0 18.9 19.1 15.9 24.8 21.8 22.5 17.6 13.3
40-44 19.7 19.9 21.6 18.1 20.6 27.0 20.6 16.4 17.1 18.9
45-49 18.1 20.6 19.0 22.2 20.0 20.5 18.5 18.2 24.5 18.4
50-54 20.5 18.5 21.6 17.7 21.7 21.8 18.5 15.3 20.3 24.0
55-59 16.9 20.0 17.7 23.9 21.5 16.3 23.0 19.8 21.1 19.9
60-64 19.4 19.2 20.0 20.6 20.8 18.2 20.0 23.5 16.3 21.9
65+ 21.6 24.5 19.9 21.7 12.3 18.0 23.7 23.3 21.1 13.9
Household’s head education
Primary 30.6 24.9 19.8 16.3 8.4 31.9 23.2 20.1 15.5 9.3
Secondary 21.0 22.5 19.6 16.5 20.4 20.5 20.7 25.2 17.4 16.2
Tertiary 15.0 17.2 20.2 22.6 25.0 15.3 18.6 18.4 22.5 25.2
Note: Individuals are ranked by consumption per capita.
42
The characteristics of individuals and household heads correlate with poverty status.
Table A.4. Household and individual characteristics correlations with poverty status
Correlates with poverty status Population average
2007 2014 2007 2014
Female 0.00 −0.01 54.4% 54.3%
(0.01) (0.00)
Age group (reference group = 0–14)
15–24 0.01 0.01 17.5% 12.5%
(0.01) (0.01)
25–34 −0.01 0.00 11.8% 12.2%
(0.01) (0.01)
35–44 0.01 0.02* 11.4% 10.8%
(0.01) (0.01)
45–54 0.03* 0.02** 15.5% 14.9%
(0.01) (0.01)
55–64 0.06*** 0.03* 10.9% 17.2%
(0.02) (0.01)
65+ 0.11*** 0.04** 13.9% 15.9%
(0.02) (0.02)
Urban −0.10*** −0.11*** 42.2% 43.2%
(0.03) (0.02)
Household size 0.04*** 0.01* 3.44 3.11
(0.01) (0.01)
Number of children 0.02 0.03** 0.82 0.69
(0.01) (0.01)
Number of elderly 0.05*** 0.03* 0.31 0.32
(0.02) (0.02)
Constant 0.12*** 0.09***
(0.03) (0.02)
Observations 16,589 11,741
Adjusted R 2
0.051 0.042
43
Table A.5. Household head characteristics correlations with poverty status

Correlates with poverty status Population average
2007 2014 2007 2014
Female −0.01 −0.03 **
34% 34.1%
(0.02) (0.01)
Age group (reference group = 15–24)
25–34 0.08** 0.06*** 12.4% 12.1%
(0.03) (0.02)
35–44 0.14*** 0.09*** 20.9% 18.2%
(0.03) (0.02)
45–54 0.13*** 0.10*** 28.1% 23.5%
(0.03) (0.02)
55–64 0.10*** 0.08*** 17.0% 24.6%
(0.03) (0.02)
65+ 0.10*** 0.05** 19.0% 19.6%
(0.04) (0.02)
Education level (reference group = without primary)
Primary −0.09 0.03 6.0% 3.6%
(0.06) (0.11)
Secondary incomplete −0.11 −0.14 17.5% 18.6%
(0.07) (0.11)
Secondary complete −0.23*** −0.20* 16.9% 17.7%
(0.06) (0.12)
Secondary professional −0.25*** −0.20* 26.2% 29.1%
(0.07) (0.11)
College −0.31*** −0.27** 16.4% 14.7%
(0.07) (0.11)
University −0.37*** −0.28** 15.3% 16.0%
(0.06) (0.11)
Sector of employment (reference group = inactive or unemployed)
Agriculture 0.01 0.03 32.6% 44.5%
(0.03) (0.02)
Industry −0.06** −0.05** 16.4% 13.4%
(0.03) (0.02)
Services −0.10*** −0.03
(0.02) (0.02) 27.3% 28.8%
Constant 0.42 ***
0.25**
(0.07) (0.12)
Observations 16,589 11,741
Adjusted R 2
0.073 0.064
44
Annex B.
Nonmonetary poverty
Table B.1. Correlations between the multidimensional poverty indicators and monetary poverty status
Probit monetary poor=1
2007 2008 2009 2010 2011 2012 2013 2014
Bad health 0.127*** 0.208*** 0.085 0.207*** 0.135** 0.155*** 0.116 0.174**
(0.049) (0.048) (0.053) (0.058) (0.056) (0.060) (0.072) (0.074)
No insurance 0.141*** 0.090** 0.180*** 0.261*** 0.184*** 0.080 0.159** 0.199***
(0.048) (0.046) (0.054) (0.054) (0.056) (0.065) (0.065) (0.076)
Low education, working age 0.259*** 0.261*** 0.378*** 0.314*** 0.322*** 0.187** 0.354*** 0.205**
(0.066) (0.069) (0.069) (0.073) (0.078) (0.077) (0.092) (0.088)
Behind in compulsory school- 0.409*** 0.133 0.315** 0.256 -0.031 0.383** 0.422* 0.176
ing, school age (0.157) (0.167) (0.158) (0.161) (0.161) (0.190) (0.217) (0.255)
Labor force participation, 0.051 0.081 0.009 -0.085 0.060 0.088 0.075 -0.053
working age (0.065) (0.062) (0.072) (0.077) (0.081) (0.081) (0.097) (0.093)
Unemployment and underem- 0.116 0.213*** 0.247*** 0.207** 0.327*** 0.324*** 0.360*** 0.180*
ployment, working age (0.074) (0.075) (0.074) (0.081) (0.080) (0.086) (0.094) (0.104)
House material 0.027 0.207*** 0.252*** 0.155*** 0.201*** 0.027 0.206*** 0.117
(0.054) (0.053) (0.059) (0.059) (0.060) (0.064) (0.069) (0.075)
Toilet 0.023 0.146 0.147 -0.034 0.083 0.221* 0.509*** 0.198
(0.103) (0.092) (0.111) (0.102) (0.122) (0.122) (0.173) (0.138)
Water 0.106 0.050 -0.064 0.071 -0.096 0.169** 0.010 0.147
(0.079) (0.067) (0.068) (0.072) (0.067) (0.074) (0.081) (0.096)
Living space 0.386*** 0.335*** 0.263*** 0.383*** 0.306*** 0.355*** 0.475*** 0.362***
(0.048) (0.047) (0.054) (0.055) (0.055) (0.061) (0.069) (0.077)
Heat 0.227*** 0.254*** 0.331*** 0.539*** 0.614*** 0.372*** 0.093 0.410***
(0.076) (0.074) (0.088) (0.083) (0.106) (0.113) (0.162) (0.149)
Sewage 0.429*** 0.372*** 0.610*** 0.511*** 0.520*** 0.420*** 0.607*** 0.405***
(0.105) (0.089) (0.094) (0.093) (0.086) (0.093) (0.099) (0.112)
Constant -1.496*** -1.591*** -1.775*** -1.997*** -2.183*** -2.037*** -2.503*** -2.324***
(0.064) (0.060) (0.065) (0.080) (0.081) (0.089) (0.104) (0.110)
Number of observations 16,589 16,420 15,066 14,379 14,659 13,974 12,354 11,741
Adjusted R2 0.092 0.108 0.161 0.168 0.168 0.138 0.198 0.141
Note: *** .01, ** .05, * .1
45
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Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

Figure 29. Employment status of the poor..............................................................................................13

Figure 57. Poverty rate, by household composition....................................................................................24

We thank Qimiao Fan (Country Director), Carolina Sánchez-Páramo

The challenges for progress include spatial and cross-group inequalities,

The Moldova Poverty Assessment 2016 includes three prongs of analysis:

NGE] [CELLRA [CELLRA

Slovak Republic (2007-…

30 NGE] NGE] NGE]

GDP per capita (2011 PPP)

Labor markets contributed to the progress, but mostly through nonagricultural

Continued progress in poverty reduction and shared prosperity face tremendous

<$2.50 $2.50-$5.00 $5.00-$10 >$10 National pov line

Box 1. National Poverty Measurement Methodology

Russian Federation (2007-2012)

Stayers Upward mobility Downward mobility Never poor

Yet, Moldova is one of the poorest countries in Europe

Poverty rate (5 USD 2005 PPP)

Figure 20. Welfare group decomposition, by country, latest available data

Extreme poor (below US$2.50 PPP) Poor (between US$2.50-5 PPP)

What drove poverty

3. reduction and shared

-20 Private Consumption Public Consumption Fixed Investments

8 See World Bank (2016b).

Figure 22. GDP and household income and consumption growth

10 2007-2008 Growth Distribution -2.0 2.6

Labor markets aided the progress mainly by nonagricultural wage increases

18% 21% 17% 19%

20% 38% 36% 20% 39% 40%

Employee Self-employed Employee Self-employed

There is a lack of employment opportunities in nonfarm sectors, especially in rural areas.

Employed people (000s)

Non-poor Poor Non-poor Poor T60 B40 T60 B40

USD 2005 PPP

Public transfers, mainly pensions,

Labor income Agriculture income Labor income Agriculture income

Migration and remittances have shaped growth, poverty

urban rural all areas social protection payments

Source: World Bank calculations based on the HBS.

4. and the issue

Spatial and cross-group inequalities persist

Figure 52. Urban population share in selected countries, %

1990 2014 2050

Poverty and Shared Prosperity in Moldova: Progress and Prospects

of the amount of water supplied to the 1990urban

Non-poor Poor Non-poor Poor T60 B40 T60 B40

35 World Bank (2016b).

64% 55% 59%

39 World Bank (2016c). 25

28% 27% 27% 23%

Non-poor Poor Non-poor Poor T60 B40 T60 B40

Tertiary Secondary Primary Tertiary Secondary Primary

Figure 65. Population, by health status

Box 3. Out-of-Pocket Health Spending

Table 2. Multidimensional poverty index: dimensions and indicators

42 Intensity is the weighted average of the deprivations in the index.

500 10% [CELLRANGE]

Figure 73. Age-gender pyramid, 2015–60

Source: Bussolo, Koettl, and Sinnott 2015.

Remittances (RHS) Remittances as a share of GDP (LHS)

Figure 83. Consumer price indicators, year-on-year, 2007–15

51 World Bank (2004).

Table A.2. Headcount ratio, by household and individual characteristics