But… What is the Poverty Rate Today? Testing Poverty Nowcasting Methods in Latin America and the Caribbean

Poverty estimates usually lag behind two years,which makes it difficult to provide real-time poverty analysis to assess theimpact of economic crisis and shocks among the less well-off, and subsequently limitingpolicy... [ view full abstract ]

Poverty estimates usually lag behind two years,which makes it difficult to provide real-time poverty analysis to assess theimpact of economic crisis and shocks among the less well-off, and subsequently limitingpolicy responses. Taking advantage of up-to-date average economic welfareindicators like the GDP per capita and a comprehensive harmonized micro data ofmore than 180 household surveys in 15 Latin American countries, we test three commonlyused poverty nowcasting methods and rank their performance by comparingcountry-specific and regional poverty nowcasts with actual poverty estimates inthe 2003-14 period. Our validation results show that the two bottom-upapproaches that we test, which simulate the performance of each agent in theeconomy in order to nowcast overall poverty, perform relatively better than thetop-down approach that we also validate, which uses welfare estimates toexplain the performance of poverty at an aggregate level over time. Results arerobust to additional sensitivity and robustness tests.