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Finite-Sample Bias and Inconsistency in the Estimation of Poverty Maps

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  • Jesse Naidoo
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    Abstract

    I argue that the estimation technique - widely used in the poverty mapping literature - introduced by Elbers, Lanjouw and Lanjouw, is highly sensitive to specification, severely biased in finite samples, and almost certain to fail to estimate the poverty headcount consistently. First, I show that the specification of the first-stage model of household expenditure strongly influences the estimated headcount; the range of obtainable estimates is on the order of 20% for many districts, and is as high as 48% for some areas. Further, some specifications imply province-level headcounts which diverge from the direct estimates by many as six standard deviations. Secondly, I construct bootstrap confidence intervals for the difference between the estimates under alternative specifications, which shows that (at a 2% level of significance) finite sample-bias is present in more than 42% of districts in even the best-performing regions. I calculate approximate lower bounds for the bias; I find it to be on the order of 3% for most areas, but the lower bounds range as high as 19.6% in some provinces. Finally, I argue that consistent estimation of the first stage model is necessary for consistent second-stage imputations and I decompose the difference between the true and estimated headcount into a sampling component and a specification component, the latter of which is asymptotically persistent. Given these results, it appears that the poverty maps estimated by this technique reflect primarily the arbitrary and unexamined methodological choices of their authors rather than robust features of the data.

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    Bibliographic Info

    Paper provided by Southern Africa Labour and Development Research Unit, University of Cape Town in its series SALDRU Working Papers with number 36.

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    Date of creation: Sep 2009
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    Handle: RePEc:ldr:wpaper:36

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    1. Elbers, Chris & Fujii, Tomoki & Lanjouw, Peter & Ozler, Berk & Yin, Wesley, 2007. "Poverty alleviation through geographic targeting: How much does disaggregation help?," Journal of Development Economics, Elsevier, vol. 83(1), pages 198-213, May.
    2. Demombynes, Gabriel & Elbers, Chris & Lanjouw, Jean O. & Lanjouw, Peter, 2007. "How good a map ? Putting small area estimation to the test," Policy Research Working Paper Series 4155, The World Bank.
    3. Harold Alderman & Miriam Babita & Gabriel Demombynes & Nthabiseng Makhatha & Berk �zler, 2002. "How Low Can You Go? Combining Census and Survey Data for Mapping Poverty in South Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 11(2), pages 169-200, June.
    4. Demombynes, Gabriel & Ozler, Berk, 2002. "Crime and local inequality in South Africa," Policy Research Working Paper Series 2925, The World Bank.
    5. Jesko Hentschel & Peter Lanjouw, 1998. "Using Disaggregated Poverty Maps to Plan Sectoral Investments," World Bank Other Operational Studies 11544, The World Bank.
    6. Simler, Kenneth R. & Nhate, Virgulino, 2005. "Poverty, inequality, and geographic targeting," FCND briefs 192, International Food Policy Research Institute (IFPRI).
    7. Elbers, Chris & Lanjouw, Jean O. & Lanjouw, Peter, 2002. "Micro-level estimation of welfare," Policy Research Working Paper Series 2911, The World Bank.
    8. Tarozzi, Alessandro, 2011. "Can census data alone signal heterogeneity in the estimation of poverty maps?," Journal of Development Economics, Elsevier, vol. 95(2), pages 170-185, July.
    9. Tara Bedi & Aline Coudouel & Kenneth Simler, 2007. "More Than a Pretty Picture : Using Poverty Maps to Design Better Policies and Interventions," World Bank Publications, The World Bank, number 6800, October.
    10. Minot, Nicholas & Baulch, Bob, 2005. "Spatial patterns of poverty in Vietnam and their implications for policy," Food Policy, Elsevier, vol. 30(5-6), pages 461-475.
    11. Alessandro Tarozzi & Angus Deaton, 2009. "Using Census and Survey Data to Estimate Poverty and Inequality for Small Areas," The Review of Economics and Statistics, MIT Press, vol. 91(4), pages 773-792, November.
    12. Elbers, Chris & Lanjouw, Peter & Mistiaen, Johan & Ozler, Berk & Simler, Kenneth, 2003. "Are Neighbours Equal? Estimating Local Inequality in Three Developing Countries," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    13. Minot, Nicholas & Baulch, Bob & Epperecht, Michael, 2006. "Poverty and inequality in Vietnam: spatial patterns and geographic determinants," Research reports 148, International Food Policy Research Institute (IFPRI).
    14. Fujii, Tomoki, 2004. "Commune-Level Estimation of Poverty Measures and its Application in Cambodia," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
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