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How valid are synthetic panel estimates of poverty dynamics?

Author

Listed:
  • Nicolas Hérault

    (University of Melbourne
    ARC Centre of Excellence for Children and Families over the Life Course)

  • Stephen P. Jenkins

    (University of Melbourne
    London School of Economics
    University of Essex
    IZA)

Abstract

A growing literature uses repeated cross-section surveys to derive ‘synthetic panel’ data estimates of poverty dynamics statistics. It builds on the pioneering study by Dang et al. (‘DLLM’, Journal of Development Economics, 2014) providing bounds estimates and the innovative refinement proposed by Dang and Lanjouw (‘DL’, World Bank Policy Research Working Paper 6504, 2013) providing point estimates of the statistics of interest. We provide new evidence about the accuracy of synthetic panel estimates relative to benchmarks based on estimates derived from genuine household panel data, employing high quality data from Australia and Britain, while also examining the sensitivity of results to a number of analytical choices. For these two high-income countries we show that DL-method point estimates are distinctly less accurate than estimates derived in earlier validity studies, all of which focus on low- and middle-income countries. We also demonstrate that estimate validity depends on choices such as the age of the household head (defining the sample), the poverty line level, and the years analyzed. DLLM parametric bounds estimates virtually always include the true panel estimates, though the bounds can be wide.

Suggested Citation

  • Nicolas Hérault & Stephen P. Jenkins, 2019. "How valid are synthetic panel estimates of poverty dynamics?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(1), pages 51-76, March.
  • Handle: RePEc:spr:joecin:v:17:y:2019:i:1:d:10.1007_s10888-019-09408-8
    DOI: 10.1007/s10888-019-09408-8
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    References listed on IDEAS

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    1. Joachim R. Frick & Stephen P. Jenkins & Dean R. Lillard & Oliver Lipps & Mark Wooden, 2007. "European Data Watch: The Cross-National Equivalent File (CNEF) and its Member Country Household Panel Studies," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(4), pages 627-654.
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    3. Hai‐Anh H. Dang & Peter F. Lanjouw, 2017. "Welfare Dynamics Measurement: Two Definitions of a Vulnerability Line and Their Empirical Application," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(4), pages 633-660, December.
    4. Jenkins, Stephen P., 2011. "Changing Fortunes: Income Mobility and Poverty Dynamics in Britain," OUP Catalogue, Oxford University Press, number 9780199226436.
    5. repec:ese:ukhlsp:2015-16 is not listed on IDEAS
    6. Hai-Anh H. Dang & Peter F. Lanjouw, 2018. "Poverty Dynamics in India between 2004 and 2012: Insights from Longitudinal Analysis Using Synthetic Panel Data," Economic Development and Cultural Change, University of Chicago Press, vol. 67(1), pages 131-170.
    7. Hai‐Anh H. Dang & Elena Ianchovichina, 2018. "Welfare Dynamics With Synthetic Panels: The Case of the Arab World In Transition," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(s1), pages 114-144, October.
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    11. Hai-Anh H. Dang & Andrew L. Dabalen, 2019. "Is Poverty in Africa Mostly Chronic or Transient? Evidence from Synthetic Panel Data," Journal of Development Studies, Taylor & Francis Journals, vol. 55(7), pages 1527-1547, July.
    12. Dang,Hai-Anh H. & Lanjouw,Peter F. & Swinkels,Robertus A & Dang,Hai-Anh H. & Lanjouw,Peter F. & Swinkels,Robertus A, 2014. "Who remained in poverty, who moved up, and who fell down ? an investigation of poverty dynamics in Senegal in the late 2000s," Policy Research Working Paper Series 7141, The World Bank.
    13. Dang,Hai-Anh H. & Lanjouw,Peter F., 2013. "Measuring poverty dynamics with synthetic panels based on cross-sections," Policy Research Working Paper Series 6504, The World Bank.
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    16. László Mátyás & Patrick Sevestre (ed.), 2008. "The Econometrics of Panel Data," Advanced Studies in Theoretical and Applied Econometrics, Springer, number 978-3-540-75892-1, April.
    17. Dang, Hai-Anh & Lanjouw, Peter & Luoto, Jill & McKenzie, David, 2014. "Using repeated cross-sections to explore movements into and out of poverty," Journal of Development Economics, Elsevier, vol. 107(C), pages 112-128.
    18. Francisco H.G. Ferreira & Julian Messina & Jamele Rigolini & Luis-Felipe López-Calva & Maria Ana Lugo & Renos Vakis, 2013. "Economic Mobility and the Rise of the Latin American Middle Class [La movilidad económica y el crecimiento de la clase media en América Latina]," World Bank Publications - Books, The World Bank Group, number 11858.
    19. Perez, Victor, 2015. "Moving in and out of poverty in Mexico: What can we learn from pseudo-panel methods?," ISER Working Paper Series 2015-16, Institute for Social and Economic Research.
    20. Frick, Joachim R. & Jenkings, Stephen P. & Lillard, Dean R. & Lipps, Oliver & Wooden, Mark, 2007. "The Cross-National Equivalent File (CNEF) and Its Member Country Household Panel Studies," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 627-654.
    21. Guillermo Cruces & Peter Lanjouw & Leonardo Lucchetti & Elizaveta Perova & Renos Vakis & Mariana Viollaz, 2015. "Estimating poverty transitions using repeated cross-sections: a three-country validation exercise," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(2), pages 161-179, June.
    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How Valid are Synthetic Panel Estimates of Poverty Dynamics?
      by maximorossi in NEP-LTV blog on 2019-04-29 14:02:10

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Lanjouw Peter, 2020. "Income mobility in the developing world: Recent approaches and evidence," WIDER Working Paper Series wp2020-7, World Institute for Development Economic Research (UNU-WIDER).
    2. Dang, Hai-Anh & Lanjouw, Peter F., 2021. "Data Scarcity and Poverty Measurement," IZA Discussion Papers 14631, Institute of Labor Economics (IZA).
    3. Jehovaness Aikaeli & David Garcés‐Urzainqui & Kenneth Mdadila, 2021. "Understanding poverty dynamics and vulnerability in Tanzania: 2012–2018," Review of Development Economics, Wiley Blackwell, vol. 25(4), pages 1869-1894, November.
    4. Vincenzo Salvucci & Finn Tarp, 2021. "Poverty and vulnerability in Mozambique: An analysis of dynamics and correlates in light of the Covid‐19 crisis using synthetic panels," Review of Development Economics, Wiley Blackwell, vol. 25(4), pages 1895-1918, November.
    5. Roger Wilkins, 2021. "Economic Wellbeing," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(4), pages 469-481, December.
    6. Hai‐Anh Dang & Peter Lanjouw & Elise Vrijburg, 2021. "Poverty in India in the face of Covid‐19: Diagnosis and prospects," Review of Development Economics, Wiley Blackwell, vol. 25(4), pages 1816-1837, November.
    7. Hai-Anh Dang & Peter Lanjouw, 2022. "Regression-based Imputation for Poverty Measurement in Data Scarce Settings," Working Papers 611, ECINEQ, Society for the Study of Economic Inequality.
    8. Himanshu & Peter Lanjouw, 2020. "Income mobility in the developing world: Recent approaches and evidence," WIDER Working Paper Series wp-2020-7, World Institute for Development Economic Research (UNU-WIDER).
    9. Alessio Fusco & Philippe Van Kerm, 2022. "Measuring Poverty Persistence," LISER Working Paper Series 022-02, Luxembourg Institute of Socio-Economic Research (LISER).
    10. David Garcés‐Urzainqui & Peter Lanjouw & Gerton Rongen, 2021. "Constructing synthetic panels for the purpose of studying poverty dynamics: A primer," Review of Development Economics, Wiley Blackwell, vol. 25(4), pages 1803-1815, November.

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    More about this item

    Keywords

    Synthetic panel; Pseudo panel; Poverty dynamics; Poverty entry; Poverty exit; BHPS; HILDA;
    All these keywords.

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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