Developing Poverty Assessment Tools Based on Principal Component Analysis: Results from Bangladesh, Kazakhstan, Uganda, and Peru
AbstractDeveloping accurate, yet operational poverty assessment tools to target the poorest households remains a challenge for applied policy research. This paper aims to develop poverty assessment tools for four countries: Bangladesh, Peru, Uganda, and Kazakhstan. The research applies the Principal Component Analysis (PCA) to seek the best set of variables that predict the household poverty status using easily measurable socio-economic indicators. Out of sample validations tests are performed to assess the prediction power of a tool. Finally, the PCA results are compared with those obtained from regressions models. In-sample estimation results suggest that the Quantile regression technique is the first best method in all four countries, except Kazakhstan. The PCA method is the second best technique for two of the countries. In comparison with regression techniques, PCA models accurately predict a large percentage of households. With regard to out-of sample validations, there is no clear trend; neither the PCA method nor the Quantile regression consistently yields the most robust results. The results highlight the need to assess the out-of-sample performance and thereby the robustness of a poverty assessment tool in estimating the poverty status of a new sample. We conclude that measures of relative poverty estimated with PCA method can yield fairly accurate, but not so robust predictions of absolute poverty as compared to more complex regression models.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Association of Agricultural Economists in its series 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia with number 25396.
Date of creation: 2006
Date of revision:
poverty assessment; targeting; principal component analysis; Bangladesh; Peru; Kazakhstan; Uganda; Food Security and Poverty; H5; Q14; I3;
Find related papers by JEL classification:
- H5 - Public Economics - - National Government Expenditures and Related Policies
- Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
- I3 - Health, Education, and Welfare - - Welfare and Poverty
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sahn, David E. & Stifel, David C., 2000. "Poverty Comparisons Over Time and Across Countries in Africa," World Development, Elsevier, vol. 28(12), pages 2123-2155, December.
- Grootaert, Christiaan & Braithwaite, Jeanine, 1998. "Poverty correlates and indicator-based targeting in Eastern Europe and the Former Soviet Union," Policy Research Working Paper Series 1942, The World Bank.
- Sharma, Manohar, 2000. "Microfinance," MP05 briefs 0, International Food Policy Research Institute (IFPRI).
- Ahmed, Akhter U. & Rashid, Shahidur & Sharma, Manohar & Zohir, Sajjad, 2004. "Food aid distribution in Bangladesh," FCND briefs 173, International Food Policy Research Institute (IFPRI).
- Filmer, Deon & Pritchett, Lant, 1998. "Estimating wealth effects without expenditure data - or tears : with an application to educational enrollments in states of India," Policy Research Working Paper Series 1994, The World Bank.
- Ahmed, Akhter U. & Bouis, Howarth E., 2002. "Weighing what's practical: proxy means tests for targeting food subsidies in Egypt," Food Policy, Elsevier, vol. 27(5-6), pages 519-540.
- Murendo, Conrad & Keil, Alwin & Zeller, Manfred, 2010. "Drought impacts and related risk management by smallholder farmers in developing countries: evidence from Awash River Basin, Ethiopia," Research in Development Economics and Policy (Discussion Paper Series) 114750, Universitaet Hohenheim, Department of Agricultural Economics and Social Sciences in the Tropics and Subtropics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.