Linking Representative Household Models with Household Surveys for Poverty Analysis: A Comparison of Alternative Methodologies

Abstract

Agenor, Chen, and Grimm compare three approaches to linking macroeconomic models with representative households in terms of their implications for measuring the poverty and distributional effects of poverty reduction strategies. These approaches are a simple micro-accounting method, an extension of that method to account for changes in employment structure, and the Beta distribution approach. Even though in their simulation exercises the three methods do not lead to fundamentally different results in absolute terms, the authors show that potential differences in the measurement of distributional and poverty effects of policy shocks can be very large.

This paper - a product of the Global Knowledge and Learning Division, World Bank Institute - is part of a larger effort in the institute to evaluate poverty and the distributional effects of poverty reduction strategies.

Keywords: Applied general equilibrium models, poverty, income distribution, policy evaluation

JEL Classification: C68, D31, D58, I32, O11