Indirect Measures:
a scorecard (objective) and perception (subjective)
based poverty
Sajjad Zohir
Lecture # 5
GED-ERG Training Workshop on Measuring Poverty
9 – 11 May 2015
What is it we want to achieve?
• Brief on the sample frame so that you may pursue
those in the afternoon classes
• Understanding the criteria for choosing one or more
variables over which a ‘threshold’ is defined.
• Understanding an ‘objective’ measure of poverty –
the case of score card (and a mention of proxy means
test)
• Understanding a subjective measure of poverty –
perception-based poverty using pair-wise comparison
– linked to Mr. Faizuddin Ahmed’s class
• Few general issues (quick test)
Check this for required sample size or any other source
• http://www.stat.ubc.ca/~rollin/stats/ssize/n
1.html
Proxy means test
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“Much of their success in targeting the poor has to do with their local level presence
and knowledge as well as efficient management information systems funded by
donors (World Bank, 2007). These NGO driven targeting strategies which are often
labour-intensive and community based are not always possible for large
government bureaucracies to adopt let alone implement.”
Proxy Means Tests: identify the extreme poor based on a formula derived from
household survey data. This method of targeting involves using observable and
verifiable
household or individual characteristics in a formal algorithm to proxy household
welfare. These variables are selected based on their ability to predict welfare as
measured by, for instance, consumption expenditure of households.
The administrative difficulties associated with sophisticated means tests used by
most public safety net programs in Bangladesh, and the inaccuracy of the results
due to the problems with measuring income also provide a strong rationale for
employing proxy means tests. Like means tests, proxy means tests can be costly
relative to other forms of household level targeting (e.g. community-based targeting
methods). However, they tend to produce the lowest errors of inclusions and thus
are considered good investments.
Proxy means test - efficiency
• The targeting efficiency of the PMTF depends on these following four key
features.
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First, the variables chosen to estimate the model should be very good predictors of
consumption (so that a substantial proportion of the variation in consumption is
explained by the regression model).
- Second, the proxies used should be relatively few but easy to measure and verify.
- Third, the model should achieve a reasonable level of targeting accuracy such that
under coverage, leakage and coverage rates associated with the model are at
acceptable levels.
- Fourth, the incidence of beneficiaries should be acceptable, i.e. the PMT should be
able to rank selected beneficiaries mostly in the bottom end of the consumption
distribution.
A variable to proxy welfare, say, consumption per capita; a database that allows you
identify limited set of variables that can explain better the variation in pc
consumption, the predicted value (a score that uses the coefficients of the estimated
equation, rounded up), the prediction error (type I and II) for different groups (say,
quintile) are then used ex ante to design programs. Programs can also be evaluated
with those variables without having to get into details of consumption data.
Poverty measures – the broader canvass
Local administrative officer, grassroot organizations
combined Q-Q method to identify poor for centuries
and the same apply for the NGOs/MFIs
Decline in authority
of local NGOs call
for removing
discrepancies in
distant observations
– thus, Perception
surveys continue
HIES that permits reliable
estimates at division/zone levels
Entry of multidimensionality, with HIES
remaining as the basis
PMT for design and
evaluation of support
programs targeting
households
Small Area Estimation,
using census and HIES
for geographic targeting
10 questions scorecards
for application by local
organizations
Any guess on the future of HIES?
Poverty Score Card
Perception
• The poverty scorecard here differs from “proxy means tests”
(Coady, Grosh, and Hoddinott, 2002) in that it is tailored to the
capabilities and purposes not of national governments but
rather of local, pro-poor organizations. The feasible poverty
measurement options for local organizations are typically
subjective and relative (such as participatory wealth ranking
by skilled field workers) or blunt (such as rules based on landownership or housing quality)
• Bootstrapping is a nonparametric technique of estimating the
standard error of a parameter estimate using repeated samples
from the original data. This is done by sampling with
replacement.