This report provides the most comprehensive and rigorous analysis
of Iraqi income and expenditure in several decades. The report
makes extensive use of the Iraq Household Socio-Economic Survey,
the first nationwide income and expenditure survey since 1988.
IHSES data is complemented income and expenditure data from a wide
range of other measures of living standards, allowing us to analyze
living standards in a holistic way. The analysis presented here was
performed with two main goals "first, to inform the Government s
Poverty Reduction Strategy; and second, to serve as a baseline for
future assessments of changes in living standards and the
identification of critical issues for deeper examination. Iraqi
living standards have two unusual characteristics. First, they have
fallen over the past generation. Second, they feature surprisingly
little inequality. These characteristics are both rooted in Iraq s
recent history of authoritarian government, war, military
occupation, insurgency, and civil strife leading to infrastructure
destruction and population displacement. There have been few
opportunities for individuals to prosper from professional or
entrepreneurial activities. Decades of neglected investment have
resulted in deterioration of social services and economic
infrastructure. Consequently, individuals have lacked capabilities
to prosper and an investment climate conducive to prosperity.
School enrollment and life expectancy have declined. Extremely low
returns to education reflect the combination of poor educational
quality and lack of employment opportunities. In terms of economic
infrastructure, access to reliable electricity and water, and even
access to paved roads are low, are further reflections of decades
of neglect. While the upper end of the distribution has been pulled
down by a lack of opportunities, the lower end has been supported
by direct government provision of food. The Public Distribution
System (PDS) provides 85 percent of food needs. While PDS has been
useful as a safety net for the poor and the vulnerable, the system
is expensive, inefficient, and fiscally risky. Indeed, PDS food
rations account for a far greater share of public spending than
does education or health. Going forward, Iraq faces two main
challenges. First, although Iraq does not have to develop from
scratch, it faces a formidable challenge in re-development. Second,
a shift by the Government is required "from direct provision of
basic subsistence toward investment in human capacities. The
Government can provide an enabling environment through investments
in economic infrastructure and services to business and citizens,
thus allowing the population to make productive use of education
and their own labor. Both challenges are now being taken up by the
Poverty Reduction Strategy, which articulates a detailed set of
required actions and outlines priorities for government spending.
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