Estimation of poverty and inequality in small areas: review and discussion

Abstract

Never better said, a correct diagnosis is crucial for patient recovery. In the eradication of poverty, which is the first of the sustainable development goals (SDGs) established by the United Nations, efforts in the form of social aid and programs will be useless if they are not directed where they are most needed. Nowadays, monitoring the progress on the SDGs is even more urgent after the sanitary crisis, which is reversing the global poverty reduction observed since 1990 and, given that social development funds are always limited, managing them correctly requires disaggregated statistical information on poverty of acceptable quality. But reliable estimates on living conditions are scarce due to sample size limitations of most official surveys. Common small area estimation procedures supplement the survey data with auxiliary data sources to produce more reliable disaggregated estimates than those based solely on the survey data. We describe the traditional as well as recent model-based procedures for obtaining reliable disaggregated estimates of poverty and inequality indicators, discussing their properties from a practical point of view, placing emphasis on real applications and describing software implementations. We discuss results from recent simulation experiments that compare some of the unit-level methods in terms of bias and efficiency, under model- and design-based setups. Finally, we provide some concluding remarks.