Perceived “common” social problems and macroeconomic trends in Azerbaijan

. The research presents an elaborated mapping of common social problems in Azerbaijan across country’s regions. Using a survey dataset of 2161 respondents representing various socio-demographic categories of the population, the study borrows a two-stage approach to identify the “common” social problems in the country. Primary research findings are (1) the "top 5" list includes inflation, unemployment, corruption, state of education and health, and poverty, (2) a correlation exists between macro-economic trends and the population's social problem perception, (3) the subjective evaluation is relatively less institutional in the regions, and among less educated people, and (4) poverty is a typical problem for the less educated people. From institutional perspective, Azerbaijan government should put more effort into enhancing governance quality. On the economic side, the government needs to reconsider its official unemployment and poverty records to do more precise policy estimates, which is crucial to abstaining from social unrest.


INTRODUCTION
Social unrest records display an increasing trend globally (see Institute for Economics and Peace 2020) and are common to all countries -either having democratic or autocratic regimes (Mudhiah et al., 2015).Besides being affected by socio-economic factors (International Labor Organization (ILO), 2013; Barrett & Chen, 2021), social unrest likelihood in a country is also strongly correlated with past turmoil within the country and in the neighbouring countries (Hlatshwayo & Redl, 2021).
There are two primary criteria to consider an issue as a social problem -(a) affecting multiple individuals and (b) is a concern for many people (Mills, 2000).Research reveals that the threat of social instability motivates autocrats or ruling parties to redistribute welfare benefits to maintain political survival in nondemocratic regimes (Albertus, 2015).From this perspective, mapping social problems present a

Regions
By the Presidential decree on July 7, 2021, Azerbaijan is divided into 14 economic regions (see Figure 1.), followed by ASERC (2021).Note that the country is relatively small (86.6 thousand square km.) with just over 10 million population.Baku city (the capital) and the Absheron-Khizi region are the most populated area while remaining somewhat similar.Also, note that the East Zangazur and Karabakh's majority had been under occupation, controlled by Armenia before 2021, which Azerbaijan retook after the 44-day war in the last quarter of 2020.A small part of the Karabakh region is inhabited by ethnic Armenians who still refuse Azerbaijan's authority, which the survey does not cover.Due to the destruction and massive landmines, there are no settlements in the remaining parts of the retaken area.Origins of East Zangazur and retaken part of the Karabakh region have settled in the other areas of the Republic.
Taking all the aforementioned remarks into account, the study reconsiders the size effects of current regional classification and merges less populated economic regions with similar geographical locations: • Baku city • Absheron-Khizi region • The north area (including Guba-Khachmaz, Sheki-Zagatala, and Mountainous Shirvan regions).• The central area (including Central Aran, Mil-Mughan, and Karabakh regions) • The south area (including Shirvan-Salyan, and Lankaran-Astara regions) • The west area (including Ganja-Dashkasan and Qazakh-Tovuz regions) Due to very low respondents attended, the analysis excludes the Nakhchivan Autonomous Republic in addition to East Zangazur economic region.East Zangazur region is not settled yet by ordinary citizens as the region was under Armenia's occupation and liberated recently, by the end of 2020.Low participation from Nakhcivan Autonomous Republic can be attributed to its blockade from the mainland of Azerbaijan and probably Meta's advertisement algorithms do not cover the region effectively as part of Azerbaijan.

Figure 1. New regional classification in Azerbaijan
Baku city and the Absheron-Khizi region have smaller areas while settling a larger population share.North-Central and South-West have approximately equal sizes.1) denote those with official registration.However, many unregistered inhabitants are due to internal migration (including internally displaced persons (IDPs) from East Zangazur and retaken part of Karabakh).Hence, population data could be less accurate due to the effects of internal migration.In this context, the overrepresentation of Baku and Absheron-Khizi regions in the sample could be acceptable.Overall, the dataset provided by ASERC (2021) allows mapping Azerbaijan's most cited (top 5) social problems.

Hypothesis development
The research is a multilevel descriptive analysis.Figure 2 presents the conceptual model postulating the rising mechanism of social problems at the "Macro level" and "Micro level".Macro-level conditions might influence an individual's subjective social problem evaluations (), which also determines () the subjective ranking within a pool of social problems.Both simple (aggregation of individual evaluations) and complex aggregation ("majority effect", group conformity, social learning biases, see Van Tubergen (2020)) explain the channel .In this context, main social problems could overlap or vary at macro and micro-level analysis.Simultaneously, because individuals observe the macro-level realities (economic performance, governance quality, etc.) and are exposed to media transmission, and because a government's behaviour is endogenous (affected by what concerns voters the most), a correlation () should exist.From this perspective, I firstly review historical data of related macroeconomic and governance quality indicators (Macro level), and later incorporate the survey data (Micro level) to explore the subjective evaluation differences due to social context effects (see Figure 2).

Variables
The sampling frame of ASERC ( 2021) includes all Facebook and Instagram users.At first sight, this could be a limitation in representing the behaviour of social groups.The survey actively used paid ads and reached more than 100 thousand people.Hence, the dataset presents an approximate view of Azerbaijan's population, considering that social media usage has increased during the pandemic.
The survey includes many individual specific questions.In this study, incorporated indicators are gender (male, female), age (ranging from 17-80), and the current region of residence (by 14 economic regions).Table 2 displays the distribution of the dataset by gender, and age groups in a geographical context.The gender and age structure of the dataset does not vary significantly in the regional context.There is a plausible pattern regarding the level of education: respondents with master's or higher degrees mainly settle in Baku city and the Absheron-Khizi region.

"Common" social problems
A scientific approach to identifying "common" problems in ASERC ( 2021) is a 2-stage process.At the first stage, a group of experts have agreed on a list of main public issues.Later (second stage), the list was shared on social media to get comments and additions from the public (see Figure 8 for the final list).
Here, the "common" problem notation denotes mentioned "top 5" public issues by each respondent representing different social contexts.Limiting the maximum number of choices to 5 implicitly display "more important" issues.Those who mentioned "all listed problems are important" in the "other" option have been removed from the analysis.

MACRO-LEVEL ANALYSIS
Azerbaijan is a land-locked developing country located in the South Caucasus on the western coast of the Caspian Sea.The country has rich oil and gas reserves, enjoyed an oil boom from 2005 to 2015 and implemented a generous fiscal policy (see Aliyev and Gasimov 2018).However, a boom in the oil sector and a massive injection of natural resource earnings into the economy led to some inefficiencies.The oil sector still generates nearly half of total output (see Figure 3) and approximately 90% of exports.Numerous studies reveal the signs of resource curse symptoms in Azerbaijan's economy (Shaw 2013;Hasanov 2013;Gasimov, 2014;Niftiyev 2020).However, the "oil boom honeymoon" ended in 2015 after the oil price crash, accompanied by the production decline.The government was forced to devaluate the national currency twice (February 21 and December 21) within a year (Czech and Niftiyev 2021).Devaluations, in turn, resulted in inflationary pressure (Mukhtarov, Mammadov, and Ahmadov 2019).Two-digit inflation (12.4-12.9%)was announced by the Central Bank for 2016 and 2017, respectively.
Although inflation stabilized at around 3% in the following years, the Central Bank (2022) has reported average yearly inflation to be 6.7% in 2021, which climbs to 12.2% by February of 2022.The increase in food prices is even higher (the reported rate is 17.2%).Figure 5 displays the monthly price change in the disaggregated consumer basket.
Note that monthly inflation in food products has been over 2% during the last six months.Moreover, food prices have recorded a remarkable upward change since July 2021.In this context, inflation might be among Azerbaijan's most mentioned social problems.Another primary outcome of the oil boom is a heavy concentration of people and investments in Baku and its surrounding region (Absheron-Khizi).According to the State Statistical Committee of Azerbaijan Republic (SSCAR 2021a), more than 58% of the population's nominal earnings belong to Baku city, which corresponds to less than 2.5% of the territory and resides over 2.3 million people (nearly 23%).Baku should take even a larger share if non-registered residents (see Qəribova and Rüstəmova, 2020) are considered.The share of the remaining regions in the population's nominal income varies within the 2-5% range (Figure 6).
Regional income inequality is much more apparent with per-capita nominal income data.Baku is a significant outlier with over 14 thousand AZN per capita nominal income.It is nearly 4.5 times the percapita nominal income in the Absheron-Khizi region, just around Baku.Therefore, one may correctly expect domination of economics oriented social problems (inflation, unemployment, poverty) in Azerbaijan's regions.
Official data regarding unemployment and poverty in Azerbaijan is less informative and looks imprecise.According to official statistics (SSCAR 2021b), the unemployment rate was 7.2% in 2020 and 4.2% in 2019.Simultaneously, the latest reported poverty level in the country is 6.2% (SSCAR 2021b).Unemployment and poverty should not be common social problems if the official data is accurate enough.Source: World Bank (2022).
World Bank (2022) estimates that Azerbaijan's governance indicators have always been under zero.However, there is a moderate improvement in 2 dimensions: government effectiveness and regulatory law.There is a slight upward trend of remaining indicators except for voice and accountability.The least estimates attributed to voice and accountability and control of corruption.Reports by Human Rights Watch (2020) and Freedom House (2022) also underline governance quality issues in the country.From this point of view, governance quality concerns of citizens, especially voice and accountability and control of corruption, could be among "common" social problems.
A quick screen of statistical records provides some insights regarding the state of health.According to Global Health Security Index (2019), Azerbaijan is the 117 th among 195 countries.A decline in health capacity (number of skilled staff and beds) from 2010 to 2020 despite population growth (Aliyev 2021).From this perspective, people are likely dissatisfied with Azerbaijan's state of health.
On the other hand, Azerbaijan is proud of its very high literacy rate.According to UNESCO (2022), the growth enrolment ratio in secondary education was 94% by 2020.However, in the same year, the primary and tertiary education enrolment rates were around 45% and 35%, respectively.Furthermore, government expenditure on education comprises 10.5% of the total state budget (UNESCO 2022).According to Silova (2010), most (over 90% of sampled) students receive tutoring.A high level of private tutoring remains in the country, and public discourse remains.The probability is higher that such enormous interest in private tutoring is associated with dissatisfaction with the current state of public education.

RESULTS
In total, 2161 respondents have made 10030 mentions.Though the maximum number of choices is limited to 5, some respondents have made choices under five.Below, Figure 8 illustrates a quick review of the distribution in mentions.The first insight is that people respond to macroeconomic policy performance in Azerbaijan.Inflation is the most selected social problem (58%), which is quite plausible in the context of recent inflationary pressure (see Figure 3).However, the second and sixth most selected public issues, unemployment (53%) and poverty (36%) require interrogation of reported official statistics' accuracy.The remaining three social problems within the top-5 list are governance quality related.Respondents underline issues in the control of corruption (by 52%), dissatisfaction with the state of education (by 49%) and healthcare (by 44%).

Common problems in regional context
Inflation is a "number 1" social problem in the whole country.Nevertheless, it is slightly less severe in Baku city and the Absheron-Khizi region compared to the remaining areas.Table 3 tabulates the share and ranking of more frequently mentioned social problems in the regional context.Respectively, 54% and 57% of respondents put inflation within their top-5 social problem choices.In contrast, a larger share (62-66%) of respondents set apart inflation in the regions.The result re-confirms the regional inequality issue (Figure 6).Meanwhile, results support the idea of Easterly and Fischer (2001) that poor people are more likely to mention inflation as a "top national concern".
Unemployment is the second most mentioned (by 53%) social problem in the whole sample and the regions, while it is the 4 th in Baku's ranking by half of the respondents.Mentions in regions vary within [53%, 60%].Unemployment is relatively more common in the South, followed by the North, West, and Central areas.
Corruption/bribery and nepotism (hereafter corruption) is perceived as the third top national concern with 52% mentions.In the regional context, corruption remains in ranking within the [47%, 54%] interval.Interestingly, total mentions of corruption are almost equal in Baku city, Central, North, and South areaaround 53%.The problem received fewer mentions in the Absheron-Khizi region and the West area.

Source: own calculation
The remaining two common public issues concern public service quality (state of education and healthcare) and poverty in the country.The state of education is consistently among the top-5 list, the second most mentioned (by 53%) problem in Baku city, followed by the Absheron-Khizi region (by 52%).The state of healthcare and poverty completes the top-5 list.Respondents are unsatisfied with healthcare primarily in the North area (by 46%), Absheron-Khizi region (by 46%) and Baku city (by 45%).Poverty is only within the top-5 most mentioned list in West regions (44%) and the Central area (41%).

Common problems in the "educational attainment level and regions" context
Educational attainment should be one of the primary factors affecting an individual's perception of common problems.From this perspective, mapping the top-5 social problems for the groups of people with different educational attainment levels should create more realistic imagination.Figures 9-10 represent the mapping data for less-and more educated groups.
For the least educated group, inflation is the biggest concern (mentioned by 62.4%), followed by unemployment (by 59.8%) and corruption (by 51%).The percentage of mentions further increases in regions.However, the most prominent fact is that the state of healthcare never falls into the top-5 of comprehensive school (9-or 11-year compulsory education) graduates.Instead, poverty is at the 4 th rank with 46.4%, which is more severe in regions.On the contrary, the state of education is a common problem in the economically developed area, Baku city and the Absheron-Khizi region.In regions, the state of education is within the top-5 of only the West region.Regarding so-called college graduates, the data show relatively less importance on institutional issues like corruption (by 41%), and state of education and healthcare (35%).On the contrary, inflation (by 68%), unemployment (by 59%) and poverty (by 48%) receive considerable higher mentions.Inflation is a bigger concern in regions, especially in the Central area, while unemployment does not entail a region-center pattern.Regarding poverty, the West area is an outlier with 77% mentions, while others are generally within ±5%, around 48%.
Comparing Figure 9 to Figure 10 demonstrates a substantial perception difference associated to the level of educational attainment.Although a college education does not substantially contribute to people's earnings in Azerbaijan (see Ismayilov et al., 2022), having a university degree matters significantly.

Figure 3 .
Figure 3. Azerbaijan's economic growth trends Source: Author's own creation based on the Central Bank's statistical bulletins.

Figure 4 .
Figure 4. Growth in population income and inflation rate dynamics Source: Author's own creation based on the Central Bank's statistical bulletins.

Figure 5 .
Figure 5. Monthly inflation records (in %, from January 2021 to February 2022) Source: Author's own creation based on the Central Bank's statistical bulletins.

Figure 9 .
Figure 9. Mapping social problems by less educated peopleSource: own calculation

Table 1
Representation of regions (% of total)

Table 2
Sample's composition by gender and age groups across regions

Table 3
Top-5 social problem mentions by regions