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Kernel Density Estimation Based on Grouped Data: The Case of Poverty Assessment

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Author Info
Camelia Minoiu
Sanjay Reddy

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Abstract

We analyze the performance of kernel density methods applied to grouped data to estimate poverty (as applied in Sala-i-Martin, 2006, QJE). Using Monte Carlo simulations and household surveys, we find that the technique gives rise to biases in poverty estimates, the sign and magnitude of which vary with the bandwidth, the kernel, the number of datapoints, and across poverty lines. Depending on the chosen bandwidth, the $1/day poverty rate in 2000 varies by a factor of 1.8, while the $2/day headcount in 2000 varies by 287 million people. Our findings challenge the validity and robustness of poverty estimates derived through kernel density estimation on grouped data.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/183.

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Length: 34 pages
Date of creation: 22 Jul 2008
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Handle: RePEc:imf:imfwpa:08/183

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Keywords: Poverty ; Economic models ; Income distribution ; Data analysis ;

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  6. Xavier Sala-i-Martin, 2002. "The World Distribution of Income (estimated from Individual Country Distributions)," NBER Working Papers 8933, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE. [Downloadable!]
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  13. Chen, Shaohua & Ravallion, Martin, 2004. "How Have the World's Poorest Fared Since the Early 1980s?," Policy Research Working Paper Series 3341, The World Bank. [Downloadable!]
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  18. Nanak Kakwani & Hyun H. Son, 2006. "New Global Poverty Counts," Working Papers 29, International Policy Centre for Inclusive Growth. [Downloadable!]
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