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Developing Poverty Assessment Tools Project:
Note on assessment and improvement of tool accuracy


The IRIS Center

2 June 2005

SARPN acknowledges the ELDIS website as the source of this document.
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At the workshop organized by the project on January 30, 2004, practitioners identified a number of standards for evaluating the performance of poverty assessment tools.1 This note summarizes key issues in refining and evaluating the accuracy of these tools, beginning with the conceptual problems with using a “bright line” to categorize households’ level of well-being.

Alternative Criteria for Assessing Tool Accuracy2

Background

The USAID/IRIS project on Developing Poverty Assessment Tools is collecting new data in four countries to assess a selected set of indicators against the task of identifying “very poor” households (according to the statutory definition of extreme poverty, discussed below). A benchmark for assessing measurement accuracy is developed using the expenditure module of the World Bank’s Living Standards Measurement Survey (LSMS): detailed expenditure data are collected from a sample of households, providing the best available quantitative information on the “true” poverty status of each household.3 A composite survey questionnaire, compiled from several of the tools under consideration, is administered to the same set of households exactly 14 days later. Statistical methods are then used to identify the 5, 10, or 15 indicators within this composite survey that most accurately reflect the “true” poverty status of each household – that is, that most closely track the benchmark results.

In addition, a comparative analysis draws on existing LSMS data sets from an additional eight countries to identify the 5, 10, or 15 best poverty predictors (using a similar methodology and set of variables), to facilitate generalization of findings over a larger number of countries.

Any effort to assess the poverty status of a set of households – to classify each household as either very poor or not – must start with the choice of an appropriate poverty line. This project is tasked with finding tools to identify households living in extreme poverty – the very poor, defined as all households living below the “extreme poverty” line established in the Amendment to the Microenterprise for Self-Reliance and International Anti-Corruption Act of 2000.

According to that legislation, a household is classified as “very poor” if either
  1. the household is “living on less than the equivalent of a dollar a day” ($1.08 per day at 1993 Purchasing Power Parity) — the definition of “extreme poverty” under the Millennium Development Goals;


  2. or

  3. the household is among the poorest 50 percent of households below the country’s own national poverty line.
The wording of the legislation suggests that Congress intends for the higher of these two alternative criteria to provide the applicable extreme poverty line for a given country.


Footnotes:
  1. Notes from this session can be found at http://www.povertytools.org/documents/accuracy.pdf. For the full report from the Certification Criteria workshop, visit http://www.povertytools.org/documents/Criteria%20Workshop%20Report.pdf


  2. “Tool” in the context of this paper refers only to the set of indicators used to assess poverty. A “poverty assessment tool” for the purpose of this project encompasses the range of issues involved in collecting and analyzing data, as well as the indicators used.


  3. Most development specialists agree that poverty is a multi-dimensional problem, of which an inadequate level of income or expenditures is but one facet. Vulnerability to various kinds of risk, political and social disempowerment, and lack of access to social services and assets are equally important dimensions of the reality of poverty. However, because the language of the Congressional legislation that underlies this project defines poverty only in monetary terms, the project focuses exclusively on one dimension of poverty: measuring household incomes or expenditures.


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