A Comparison of Small Area Estimation Methods for Poverty Mapping

Poverty maps are an important source of information on the regional distribution of poverty and are currently used to support regional policy making and to allocate funds to local jurisdictions. But obtaining accurate poverty maps at low levels of disaggregation is not straightforward because of insufficient sample size of official surveys in some of the target regions. Direct estimates, obtained with the region-specific sample data, are unstable in the sense of having very large sampling errors for regions with small sample size. Very unstable poverty estimates might make the seemingly poorer regions in one period appear as the richer in the next period, which can be inconsistent. On the other hand, very stable but biased estimates (e.g., too homogeneous across regions) might make identification of the poorer regions difficult. Here we review the main small area estimation methods for poverty mapping. In particular, we consider direct estimation, the Fay-Herriot area level model, the method of Elbers, Lanjouw and Lanjouw (2003) used by the World Bank, the empirical Best/Bayes (EB) method of Molina and Rao (2010) and its extension, the Census EB, and finally the hierarchical Bayes proposal of Molina, Nandram and Rao (2014). We put ourselves in the point of view of a practitioner and discuss, as objectively as possible, the benefits and drawbacks of each method, illustrating some of them through simulation studies.