Summary

There are an estimated one million people living in remote Papua New Guinea in either moderate or severe disadvantage. This is the first research to date that focuses specifically on poverty, shocks and coping mechanisms and informal insurance mechanisms in relation to a community of poor people living in remote rural Papua New Guinea. The thesis is motivated by concerns that, by virtue of their remoteness, the poverty experienced by these people is not understood and not addressed with specific policies. Without specific measures to assist this poor population, they are likely to remain poor into the foreseeable future. This thesis contributes new evidence on the links between location and poverty in Papua New Guinea, the shocks experienced by people in these locations and their limited access to assistance by addressing three specific questions:

1. Why are Papua New Guinea’s remote villages chronically poor and what are the characteristics of the poorest in those villages?

2. How do Papua New Guinea’s remote poor manage risk?

3. How effective are insurance arrangements in remote Papua New Guinean villages?

The research is an economic case study that included a range of data collection methods including focus groups, semi-structured and in-depth interviews as well as a single cross-section household survey. The data were collected in February 2012. There are a number of limitations on the conclusions that can be drawn from a single cross-sectional survey. These include extrapolations with respect to the conditions across the rest of the year, in particular with respect to consumption of seasonal food, expenditures and income data. In addition, a single cross section of data is insufficient to determine whether individuals or households are chronically poor.

Another limitation related to a lack of comparable data from other studies. This was particularly so with respect to the analysis of the strength of informal insurance

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networks. In part, this weakness is due to the small number of data sets that form the majority of the research base on this issue.

Chapter 2 fills a gap in the literature on poverty in Papua New Guinea and in the international literature on poverty in remote places by using a case study approach to examine poverty in an area of Obura Wonenara District. While it is known that certain remote parts of PNG are very poor, this essay, for the first time, examines the association between poverty and geospatial characteristics, such as isolation and topography, and village level characteristics. An asset index is created to show which households are relatively poorer. Those living in higher elevations are shown to be more asset poor than others. Households with a literate household head and where there is female ownership of assets are less poor.

At the time of the survey (February 2012) the study area as a whole is found to suffer from food insecurity. Diet diversity, a common measure of food security, is relatively low. The average number of different foods consumed by households in the 24 hours leading up to the survey was 3.6. The most common foods consumed were sweet potato, greens and taro. A diet comprised predominately of these foods cannot provide sufficient access to animal-based protein. Given research showing deficiencies in animal-based protein in PNG, meat consumption was specifically examined. In this environment where all households are meat-based protein deficient it is found that there is a correlation between lower meat consumption and low asset levels. Larger household size is also correlated with lower meat consumption. Subsistence hunting does not offer complete cover for low meat consumption.

Overall, the evidence in Chapter 2 suggests that geospatial factors interact with inadequate government services, low levels of human capital, a lack of markets and underdeveloped family and social capital to contribute to the villagers living in chronically poor conditions. In the case of the study area, and other areas like it, food insecurity, including protein-based malnutrition, is a major characteristic of poverty. Geospatial characteristics, such as topography, are found to determine not only the poverty level of villages within PNG, but also impact on the distribution of relative poverty within remote villages.

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Chapter 3 explicitly considers the role of risk and coping measures in these remote villages. In doing so it adds to the scant economic literature on poverty in remote areas. It also addresses a gap in the international literature on the relationship between shocks, consumption-reducing strategies and assets in the context of multiple market failures. This is the first time that data has been collected and analysed on a comprehensive range of shocks and coping measures employed by households in remote Papua New Guinea. It is found that households are subject to numerous and often sequential environmental shocks which can be both covariant and idiosyncratic. In the year leading up to the survey 69 per cent of households reported a serious shock. This compared to 53 per cent in a study across 10 villages in Guatemala. The most common environmental shocks include drought, excess rain, pests and landslides. The low levels of human capital combined with geospatial characteristics of the villages mean that health shocks are also common. In a context of multiple market failures, the villagers have a limited number of coping measures to choose between when faced with a shock. This results in an early and excess reliance on consumption-reducing strategies. The reliance on consumption- reducing strategies as the main coping mechanism is consistent with international research in Guatemala. However, in the case of the Guatemala study, households were able to employ a range of market based coping strategies as well, including sale of labour and assets. In the study area, there was only one example of an asset sale in response to a shock.

Households with the most assets were found 50 per cent less likely to utilise consumption-reducing strategies than the most asset poor households. Given the regularity of shocks in the villages, households with higher asset levels may be able to maintain a higher level of human capital over time than the most asset poor households. However, in the context of the overreliance on consumption-reducing strategies in the villages, this research suggests that assets are not sufficient protection against the negative health consequences of repeated episodes of consumption-reduction, even for the high asset group.

Chapter 4 focuses on the effectiveness of informal insurance arrangements in the study area. This is the first time that network analysis has been utilised to test informal

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insurance mechanisms in remote Papua New Guinea. In addition, the essay is one of the only examples in the international literature to specifically examine intra-household insurance, and the existence of a network of potential insurers outside of the villages. Around two-thirds of households expected that they would receive assistance from someone within their household in the event of an ill-health shock. Just under half of all husband-and-wife couples named each other as expected insurers, indicating that many lead relatively separate economic lives and rely on different informal insurance networks. No support was found for polygyny being a means of expanding access to informal insurance networks.

The potential for households in the villages to receive assistance from individuals outside of the villages was very low. Only 6 out of 370 nominated insurers lived outside of Obura Wonenara District. Thus, households in the study area are isolated in terms of potential insurers in the event of a covariate shock. One implication of this is that it places greater importance on the need for government or non-government assistance in the event of a village wide shock.

Inter-household informal insurance links were also found to be weak, relative to the most similar data from other countries. Of particular note was that there were a small number of households that did not nominate any others in the villages as being potential insurers in the event of an illness shock. This group of 5 households all had asset levels that were statistically significant lower than the average. In the event of idiosyncratic or covariate shocks, these households are very vulnerable to irreversible harm.

The overwhelming finding of this essay is that when an individual in the study area falls ill, they do not have developed informal insurance networks to assist them. The lack of informal networks within the study area and with individuals outside the vicinity, means that the households are likely to be unsupported in the case of idiosyncratic and covariate shocks. Households are too poor to enter into extensive informal insurance networks, even in the face of multiple shocks. When such relationships are formed, the choice of partners is driven by proximity, a history of previous insurance and is more likely to be formed with households more able to assist, because they have higher asset wealth.

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Taken as a whole, the three essays certainly show that some in the villages are poorer than others, and that relative poverty has real consequences. The poorest within the villages are relatively geographically disadvantaged, more food insecure, more exposed to serious risk, more reliant on consumption-reducing strategies and less insured through social networks. That said, the overall message of the three essays is that taken as a whole the people living in the study area are poor and vulnerable to suffering from irreversible harm due to malnutrition as a result of the high number of negative shocks they face and an excessive reliance on consumption-reducing strategies. The sparse informal insurance networks mean that households may not receive assistance in the event of food shortages and are therefore particularly vulnerable to irreversible harm from malnutrition.