Small Area Estimation of Poverty

Executive SummaryNepal Small Area Estimation of Poverty 2011Small area estimates of poverty have become usefultool in targeting poverty reduction by geographicareas. By now, more than 60 countries have smallarea estimates of poverty (“poverty maps”). ForNepal, this is the second poverty map producedafter a gap of seven years in collaboration with theCentral Bureau of Statistics, Nepal. Visualized ongeographical map, small area estimates can conveyto audiences of all literacy levels the scale anddistribution of poverty not possible by tabular data.Further, poverty maps can be super-imposed onspatial variables such as climate or infrastructure toanalyze spatial determinants of poverty.Small area estimates improve the accuracy anddisaggregate spatially the poverty estimates madefrom survey data. The Nepal Living StandardsSurvey is representative at the level of 12 broadstrata, but district development committees inparticular value information at a lower level suchas the VDC, Municipalities – some 3970 of them.While the NLSS III includes too few observations toproduce estimates at district level or lower.The small area estimates in this report are basedmainly on most recent information from NepalLiving Standards Survey 2010-11 and Nepal Census2011. Auxiliary data sources include VDC-level GISinformation obtained from the Vulnerability Analysisand Mapping unit of World Food Program Nepal.Variables are: mean elevation in kilometers, meanslope in percentage, height range, standard deviationof height, population density in inhabitants per squarekilometer, distance to the district headquarters,length of road in kilometers (by ilaka), length ofroad in kilometers per thousand inhabitants (byilaka), length of rivers in kilometers. An improvedaccessibility measure called “Kosh” (measures howmany hours it takes for a normal person to walk fromthe VDC to the district headquarters) available withthe Election Commission was also used to enrich theestimates.Besides using more recent data and improvements inmethodology, the small area estimates in this reportremedy an important limitation of the poverty mapof 2006 by providing estimates as close as the VDC/Municipality level. Though the previous poverty mapprovided estimates for 967 ilakas, for developmentplanning proposes, estimates at even finer geographiclevels would have been more useful. This exercise ofsmall area estimation of poverty provides statisticallyreliable poverty measures for 2344 VDCs or groups ofVDCs of Nepal. When statistical reliability is doubtfulto estimate VDC level poverty, similar VDCs have beencombined to generate reliable poverty estimates for theselect aggregate of similar VDCs inside a given ilaka.For all the VDCs, even for those precise estimates cannotbe made, confidence bands for poverty estimates areprovided..The main report presents 2010/11 small-area estimatesand maps for Nepal at the 75 district, 967 ilaka and 2344“target area” level, of poverty incidence, poverty gap,and poverty severity.The report also provides maps ofthe number of poor and their average consumption.However, this “Sumary and Major Findings” containsestimates of 75 districts and 976 ilakas. In addition,out of 2344 target areas, it includes the estimates of 58municipalities and VDCs having poverty incidencegreater than 50 percent.The findings confirm the spatial distribution of povertyin Nepal. Poverty - both as a rate and headcount - ishigh in the hilly areas of Far West and parts of Mid-West. The percentage of poor varies from negligible inparts of Kathmandu to 75 percent in parts of Gorkhadistrict. A comparison with the poverty map of 2006shows that though prosperity is spreading in Nepal,it has a hard time moving West and climbing Hills.Poverty concentration in the East and Central hasdeclined while it increased in the rest. Nearly halfthe small areas have poverty higher than the nationalaverage of 25.2 percent and contain two-thirds of thepoor in Nepal.v