Small Area Estimation-Based Prediction Methods to Track Poverty: Validation and Applications

46 Pages Posted: 20 Apr 2016

See all articles by Luc Christiaensen

Luc Christiaensen

World Bank

Peter F. Lanjouw

World Bank - Development Research Group (DECRG)

Jill Luoto

RAND Corporation

David C. Stifel

Lafayette College

Date Written: June 1, 2011

Abstract

Tracking poverty is predicated on the availability of comparable consumption data and reliable price deflators. However, regular series of strictly comparable data are only rarely available. Price deflators are also often missing or disputed. In response, poverty prediction methods that track consumption correlates as opposed to consumption itself have been developed. These methods typically assume that the estimated relation between consumption and its predictors is stable over time -- an assumption that cannot usually be tested directly. This study analyzes the performance of poverty prediction models based on small area estimation techniques. Predicted poverty estimates are compared with directly observed levels in two country settings where data comparability over time is not a problem. Prediction models that employ either non-staple food or non-food expenditures or a full set of assets as predictors are found to yield poverty estimates that match observed poverty well. This offers some support to the use of such methods to approximate the evolution of poverty. Two further country examples illustrate how an application of the method employing models based on household assets can help to adjudicate between alternative price deflators.

Keywords: Rural Poverty Reduction, Regional Economic Development, Debt Markets, Achieving Shared Growth

Suggested Citation

Christiaensen, Luc and Lanjouw, Peter F. and Luoto, Jill and Stifel, David C., Small Area Estimation-Based Prediction Methods to Track Poverty: Validation and Applications (June 1, 2011). World Bank Policy Research Working Paper No. 5683. Available at SSRN: https://ssrn.com/abstract=1871579

Luc Christiaensen (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Peter F. Lanjouw

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-4529 (Phone)
202-522-1153 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/planjouw

Jill Luoto

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

David C. Stifel

Lafayette College ( email )

Easton, PA 18042
United States

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