Essays on poverty in Saudi Arabia

Abstract

In Saudi Arabia, it is estimated that around 20% of nationals live in relative poverty. Echoing this estimation, the main research objective of this thesis is to determine the causes of poverty among nationals. For this purpose, a socioeconomic survey was conducted among 496 Saudi households in Dammam, one of the largest metropolitan cities, in 2019. This appears to be one of the first independent household surveys conducted in Saudi Arabia. In addition, a subsample of 166 households took part in a lab-in-the-field experiment to measure the risk and time preferences of household heads.

In this study poverty is conceptualised as relative poverty, based on the country’s inflation-adjusted poverty line of $6 per person per day. To measure poverty, the Foster–Greer–Thorbecke (FGT) poverty index is used. Moreover, logit and tobit models are studied to analyse the determinants of the prevalence, intensity and severity of poverty. In addition, a discounted utility model is defined that applies prospect theory and quasi-hyperbolic discounting to jointly estimate the risk and time preferences of household heads.

The results show that the key determinants of poverty are unemployment and limited education. Besides, large family sizes, insufficient social capital and being of African descent increase the risk of a household being poor. Moreover, female-headed households are affected by poverty more often and more severely than male-headed households. This is because many women do not seek employment due to cultural barriers. In addition, female household heads have fewer years of education than their male counterparts, which impacts their chances of employment. Nevertheless, it was discovered that females are equally likely to find a job when they have the same educational level as males.

Furthermore, the study examined the relationship between poverty and behavioural aspects. A positive correlation between poverty and risk aversion and impatience was found. The study also enquired into Saudi Arabia’s social welfare system. Welfare payments lift one third of poor households out of poverty. However, around 15% of poor households do not receive any support. In particular, households without a national identification card are excluded from social welfare. Those households without access to governmental transfers or social networks were found to be willing to take greater risks. Moreover, female household heads receive higher social welfare payments than male heads. Hence, social welfare payments reduce the gender poverty gap to some extent.