An Econometrical Estimation of Poverty Line in Saudi Arabia and Al-Ahsa Governorate

(Maha Loutfy Hadid and Hafsa Abdelaty Ali Morci)

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Abstract

Saudi economy is classified within the largest 20 economies in the world. In spite of that, some Saudi citizens suffer from poverty. There are no official statistics about the magnitude of the poverty in Kingdom of Saudi Arabia (KSA). In order to determine poverty magnitude, a poverty line must be determined firstly to distinguish between poor and non-poor. Therefore, this paper aims to estimate the ultra and absolute poverty line at household level in KSA as a whole and in one governorate in particular (Al-Ahsa). The ultra-poverty line was estimated by estimating family food consumption function in a linear form using ordinary least squares method to derive saving function, then calculate breakeven level of income at saving function that equal the value of ultra-poverty line. Similarly, absolute poverty line estimated, but by estimate total (not food) consumption function. The findings of the study indicate that ultra and absolute poverty lines for a Saudi family were about SAR 909, 1092 a month/family respectively for 2007 and SAR 3509, 3576 a month/family respectively for 2013. Based on an average Saudi family size of 6.7 person and exchange rate of $1= SAR 0.267, the individual ultra and absolute poverty lines in 2013 were about $ 1.5 , 4.5 aday per person respectively which is considered higher than world poverty line. These results support the view that the national poverty lines in kingdom are consistent with welfare and that Saudi Arabia is one of the rich countries that have a relative tendency to use higher norms of welfare for identifying the poor. Key Words: Absolute poverty line, Break Even level of Income, Food consumption function, Saving after Food consumption, Total consumption function, Ultra poverty line
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