Johannes Gräb Econometric Analysis in Poverty Research PETER LANG Internationaler Verlag der Wissenschaften Göttinger Studien zur Entwicklungsökonomik Göttingen Studies in Development Economics Herausgegeben von/ Edited by Hermann Sautter und/and Stephan Klasen Bd./Vol. 26 HKS 44 Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access LANG Johannes Gräb · Econometric Analysis in Poverty Research 26 Poverty and inequality persist in many regions of the developing world. This may be due mainly to an ineffective targeting of policies to address the root causes of poverty. Sustainable policy interventions are in need of reliable con- cepts of poverty and of a thorough understanding of the underlying mecha- nism that lead to such deprivation. The three essays of this book add to the debate concerning appropriate statistical tools in empirical development eco- nomics. The work proposes specific methodologies to analyze the extent of poverty and its underlying factors based on recent household surveys. The first chapter deals with a concept of poverty comparisons when panel data is at hand. The second chapter studies the determinants of spatial inequality using multilevel modelling. The third chapter analyzes the relation between a child’s nutritional status and its survival probability. Johannes Gräb, born in Göttingen in 1980, studied economics at the Univer- sity of Mannheim. He was a Ph.D. Candidate as well as a research and teach- ing associate at the Department of Economics and the Center for Statistics at the University of Göttingen. He has also worked as a consultant for several international development agencies in various countries in Africa. www.peterlang.de Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access %CONOMETRICå!NALYSISåINå0OVERTYå2ESEARCH Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access Göttinger Studien zur Entwicklungsökonomik Göttingen Studies in Development Economics Herausgegeben von/ Edited by Hermann Sautter und/and Stephan Klasen Bd./Vol. 26 PETER LANG Frankfurt am Main · Berlin · Bern · Bruxelles · New York · Oxford · Wien Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access Johannes Gräb Econometric Analysis in Poverty Research With Case Studies from Developing Countries PETER LANG Internationaler Verlag der Wissenschaften Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access "IBLIOGRAFISCHEå)NFORMATIONåDERå$EUTSCHENå.ATIONALBIBLIOTHEKå $å )33.å )SBNå Úå0ETERå,ANGå'MB( )NTERNATIONALERå6ERLAGåDERå7ISSENSCHAFTEN &RANKFURTåAMå-AINå WWWPETERLANGDE "IBLIOGRAFISCHEå)NFORMATIONåDERå$EUTSCHENå.ATIONALBIBLIOTHEKå $å )33.å )SBNå Úå0ETERå,ANGå'MB( )NTERNATIONALERå6ERLAGåDERå7ISSENSCHAFTEN &RANKFURTåAMå-AINå WWWPETERLANGDE The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data is available in the internet at http://dnb.d-nb.de. Open Access: Die Online-Version dieser Publikation ist unter der internationalen Creative Commons Lizenz CC-BY 4.0 auf www.peterlang.com und www.econstor.eu veröffentlicht. Erfahren Sie mehr dazu, wie Sie dieses Werk nutzen können: http://creativecommons.org/licenses/by/4.0. Das Werk enthält möglicherweise Inhalte, die von Drittanbietern lizensiert sind. Bei einer Wiederverwendung dieser Inhalte muss die Genehmigung des jeweiligen Drittanbieters eingeholt werden. Dieses Buch ist Open Access verfügbar aufgrund der freundlichen Unterstützung des ZBW – Leibniz-Informationszentrum Wirtschaft. Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access Meinen Eltern Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access Editor’s Preface With the declaration of the Millennium Development Goals in 2000, the global fight against poverty has become one of the central concerns in global policy de- bates. Poverty alleviation policies aim at reducing extreme poverty, hunger, poor health and education outcomes. Despite considerable efforts, many regions and countries in the world are still performing very badly concerning these dimen- sions of poverty. This may be due mainly to an ineffective targeting of policies to address the root causes of poverty. Sustainable policy interventions are in need of reliable concepts of poverty and of a thorough understanding of the underlying mechanism that lead to such deprivation. This dissertation contributes to analyzing unresolved important issues in the fight against poverty by proposing and applying specific statistical methodologies to analyze the extent of poverty and its underlying factors based on recent house- hold surveys in developing countries. In the first essay, Johannes Gräb is con- cerned with poverty measurement. In particular, the author elaborates a concept for poverty comparisons when the indicator of well being is observed over several points in time. Gräb shows that comparisons based upon the stochastic dominance methodology are not only robust to any specific poverty index and to any arbitrary setting of the poverty line but additionally to any aggregation procedures of indi- vidual incomes over time. He illustrates his approach by performing multiperiod poverty comparisons for Indonesia and Peru. The results show considerable de- pendence of poverty orderings on the aggregation procedures of income over time, emphasizing the relevance of the approach. In the second essay Gräb takes a closer look at the importance of geographic factors in explaining observed spatial variation in household income. The author suggests a novel methodology to addresses this issue. He builds a multilevel ran- dom coefficient model able to decompose the variance in living standards across different spatial levels. Such an approach is particularly interesting from a polit- ical point of view since it allows effective targeting of spatial units. In the em- pirical part, Gräb decomposes the sources of spatial disparities in incomes among households in Burkina Faso showing that spatial disparities are not only driven by Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access viii E DITOR ’ S P REFACE the spatial concentration of households with particular endowments but to a large extent also by disparities in community endowments. The third essay takes into account the multidimensionality of poverty. House- holds in developing countries do not only suffer from low levels of income but also from other dimensions of well-being, such as health or education. It is there- fore important to analyze the underling mechanism that lead to observed outcomes in non-monetary indicators of poverty to deduce effective poverty reduction poli- cies. Gräb investigates the role of cultural, geographic, and political factors on the relationship of anthropometric outcomes of children and Under-5 mortality rates. He focuses on the unique situation of the territory around Lake Victoria which shows a pattern of low levels of malnutrition together with dramatically high rates of mortality found in no other region in Sub-Saharan Africa. Applying linear and nonlinear multilevel regression analysis the author finds a unique interplay of cul- tural, geographic and political factors in the Lake Victoria region to be responsible for causing the described paradox. Johannes Gräb thus addresses a number of highly topical issues discussed in the ongoing literature on poverty and inequality in developing countries. He also provides very important new insights for our understanding of poverty in its many dimensions. Beyond, Gräb narrows the gap between the comprehensive statistical toolbox and its still limited application in development economic research. With his analysis, Gräb provides a valuable contribution to the economics literature on the empirical analysis of poverty in general, and on poverty comparisons, spatial income inequality, child mortality and undernutrition in particular. Prof. Stephan Klasen, Ph.D. Göttingen, June 2009 Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access Author’s Preface The submission of thesis dissertation marks the end of a long, eventful and chal- lenging journey. I would like to acknowledge the many people who accompanied me along the way. Their great support made this dissertation possible and it is because of them that my graduate experience has been one that I will cherish forever. First and foremost, I would like to express my sincere gratitude to my advisor Professor Michael Grimm. He provided me with many ideas and motivated me throughout the last years, and he gave me the freedom to pursue my academic work independently. His guidance, his patience and his willingness to help pro- vided an excellent basis for this thesis. I could not have imagined having a better advisor and mentor for my Ph.D study. I am also very grateful to Professor Stephan Klasen, who has been abundantly helpful, and has assisted me in numerous ways throughout this work. His detailed and constructive comments have been of great value for me. I also wish to express my sincere thanks to Professor Stefan Sperlich for his detailed review and his excellent guidance in statistical analysis. During this work I have collaborated with many colleagues at the University of Göttingen, and I wish to extend my warmest thanks to all those who have helped me with my work. In particular, I would like to thank my coauthor Jan Priebe for the great time we had studying the mysteries of Lake Victoria. My deepest gratitude goes to my family for their unflagging support through- out my life. None of this would have been possible without the encouragement and understanding of my parents. Finally, I am deeply thankful to my life partner, Johanna Bätzing, who has been a constant source of love, support and strength throughout this entire journey. Without her I would have struggled to find the inspiration and motivation needed to complete this dissertation. Johannes Gräb Bad Homburg, June 2009 Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access Contents List of Tables xiv List of Figures xv List of Abbreviations xvii Introduction and Overview 1 1 Robust Multiperiod Poverty Comparisons 9 1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.2 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1.2.1 Stochastic dominance in a one-period welfare measure . . 11 1.2.2 Stochastic dominance in a two-period welfare measure . . 13 1.2.3 Stochastic dominance in a n -period welfare measure . . . 17 1.2.4 Relative poverty comparison . . . . . . . . . . . . . . . . 18 1.2.5 Estimation and inference . . . . . . . . . . . . . . . . . . 18 1.2.6 Bounds to multidimensional dominance . . . . . . . . . . 19 1.3 Empirical illustration . . . . . . . . . . . . . . . . . . . . . . . . 19 1.3.1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 1.3.2 Robust multiperiod poverty comparisons for the two- pe- riod case . . . . . . . . . . . . . . . . . . . . . . . . . . 20 1.3.3 Robust multiperiod relative poverty comparisons for the two-period case within and across countries . . . . . . . . 27 1.3.4 Robust multiperiod poverty comparisons for the n -period case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 1.4 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 2 Spatial inequalities explained - Evidence from Burkina Faso 33 2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2.2 Regional Growth and Inequality in Burkina Faso . . . . . . . . . 36 2.3 Data and Empirical Strategy . . . . . . . . . . . . . . . . . . . . 40 Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access xii C ONTENTS 2.3.1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 2.3.2 Empirical Strategy . . . . . . . . . . . . . . . . . . . . . 44 2.4 Results: Sources of Spatial Inequality . . . . . . . . . . . . . . . 49 2.4.1 Model M0: The null model . . . . . . . . . . . . . . . . . 49 2.4.2 Model M1: The role of household characteristics . . . . . 55 2.4.3 Model M2: The role of community characteristics . . . . 57 2.4.4 Model M3: The role of provincial and regional character- istics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 2.4.5 Model M4: Variations in household level effects across communities . . . . . . . . . . . . . . . . . . . . . . . . 61 2.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 3 Low Malnutrition but High Mortality: Explaining the Paradox of the Lake Victoria Region 67 3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 3.2 The Paradox . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 3.3 Theoretical Framework . . . . . . . . . . . . . . . . . . . . . . . 75 3.4 Geography vs. Ethnicity: The Kenyan Context . . . . . . . . . . . 78 3.4.1 Nutritional Environment . . . . . . . . . . . . . . . . . . 78 3.4.2 Epidemiological Factors . . . . . . . . . . . . . . . . . . 81 3.4.3 Cultural Factors . . . . . . . . . . . . . . . . . . . . . . . 83 3.5 Empirical Findings . . . . . . . . . . . . . . . . . . . . . . . . . 85 3.5.1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 3.5.2 Descriptive Statistics . . . . . . . . . . . . . . . . . . . . 90 3.5.3 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 3.5.4 Regression Results . . . . . . . . . . . . . . . . . . . . . 98 3.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access List of Tables 1.1 Poverty in Peru – Difference in Dominance Surfaces (1998 / 99 - 1999 / 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 1.2 Poverty in Peru – Difference in Dominance Surfaces (1998/99 - 2000/01) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 1.3 Poverty in Peru – Difference in Dominance Surfaces (1998/99 - 2000/02) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 1.4 Poverty in Indonesia – Differences in dominance surfaces (Self- employed - Private sector) . . . . . . . . . . . . . . . . . . . . . 27 1.5 Relative Poverty in Indonesia – Difference in Dominance Surfaces (1993/97 - 1997/2000) . . . . . . . . . . . . . . . . . . . . . . . 29 1.6 Relative Poverty in Peru and Indonesia – Difference in Domi- nance Surfaces Peru (1997/2000) - Indonesia (1997/2000) . . . . 30 1.7 Poverty in Peru – Difference in Dominance Surfaces for Several Construction Modes of Time Spans . . . . . . . . . . . . . . . . . 32 2.1 Descriptive Regional Growth and Poverty Statistics . . . . . . . . 37 2.2 Determinants of spatial inequality . . . . . . . . . . . . . . . . . 42 2.3 Models - 1994 - Fixed effects . . . . . . . . . . . . . . . . . . . . 50 2.4 Models - 1998 - Fixed effects . . . . . . . . . . . . . . . . . . . . 51 2.5 Models - 2003 - Fixed effects . . . . . . . . . . . . . . . . . . . . 54 2.6 Intraclass correlation coefficients (ICC) . . . . . . . . . . . . . . 55 2.7 Proportional change of variance components . . . . . . . . . . . . 56 2.8 Contribution of observed and unobserved characteristics on the variation on each level . . . . . . . . . . . . . . . . . . . . . . . 60 2.9 Models - 1994 - Random effects . . . . . . . . . . . . . . . . . . 62 2.10 Models - 2003 - Random effects . . . . . . . . . . . . . . . . . . 62 2.11 Models - 1998 - Random effects . . . . . . . . . . . . . . . . . . 63 3.1 Mortality and undernutrition rates in the SSA context . . . . . . . 73 3.2 Classification of Variables Influencing Health and Mortality Out- comes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access xiv L IST OF T ABLES 3.3 Description on variables of interest . . . . . . . . . . . . . . . . . 87 3.4 Descriptive statistics on variables of interest . . . . . . . . . . . . 91 3.5 Determinants of stunting . . . . . . . . . . . . . . . . . . . . . . 100 3.6 Determinants of wasting . . . . . . . . . . . . . . . . . . . . . . 101 3.7 Determinants of under5-mortality . . . . . . . . . . . . . . . . . 104 3.8 Variance of family random effect . . . . . . . . . . . . . . . . . . 110 A.9 Regional Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access List of Figures 1.1 Test Domain for Dynamic Poverty Comparisons . . . . . . . . . . 15 1.2 Poverty in Peru: Dominance Surface of the Time Span 1998/99 . . 21 1.3 Poverty in Peru: Difference in Dominance Surfaces (1998/99 - 1999/2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 1.4 Poverty in Peru: Difference in Dominance Surfaces (1998/99 - 2000/01) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 1.5 Poverty in Peru: Difference in Dominance Surfaces (1998/99 - 2000/02) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 1.6 Relative poverty in Indonesia: Difference in Dominance Surfaces (1993/97 - 1997/2000) . . . . . . . . . . . . . . . . . . . . . . . 29 2.1 Growth and Poverty Incidence on Provincial Level . . . . . . . . 38 2.2 Convergence in Burkina Faso, initial per capita income and growth on the department level (135 observations), 1994-2003 . . . . . . 39 3.1 Stunting rates in SSA . . . . . . . . . . . . . . . . . . . . . . . . 74 3.2 Wasting rates in SSA . . . . . . . . . . . . . . . . . . . . . . . . 74 3.3 Theoretical Framework . . . . . . . . . . . . . . . . . . . . . . . 76 3.4 Water Requirement Satisfaction Index (WRSI) . . . . . . . . . . 80 3.5 Normalized Difference Vegetation Index - Kenya . . . . . . . . . 81 3.6 Climate Suitability for Endemic Malaria . . . . . . . . . . . . . . 82 A.7 Map of Burkina Faso . . . . . . . . . . . . . . . . . . . . . . . . 113 A.8 BLUP of HH Size - 1994 . . . . . . . . . . . . . . . . . . . . . . 114 A.9 BLUP of HH Size - 1998 . . . . . . . . . . . . . . . . . . . . . . 114 A.10 BLUP of HH Size - 2003 . . . . . . . . . . . . . . . . . . . . . . 114 A.11 Youth per Adult - 1994 . . . . . . . . . . . . . . . . . . . . . . . 114 A.12 Children per Adult - 1998 . . . . . . . . . . . . . . . . . . . . . . 114 A.13 Youth per Adult - 2003 . . . . . . . . . . . . . . . . . . . . . . . 114 A.14 Education - 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 115 A.15 Education - 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . 115 A.16 Education - 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access List of Abbreviations AIC Akaike Information Criterion AIDS Acquired Immunodeficiency Syndrome AVG Average BLUP Best linear Unbiased Estimator BMI Body Mass Index Cons Constant CV Coefficient of Variation Cov Covariance CPI Consumer Price Index DHS Demographic and Health Survey DM Direction De La Meteorologie Burkina Faso MI Ministere Des Infrastructures EA Enquete Agricole EC Enquete Communitaire ENAHO Peruvian Encuesta Nacional de Hogares EP Enquete Prioritaire EXP Expenditure Est Estimate FEWS Famine Early Warning System FGT Foster Greer Thorbecke FSD First Order Stochastic Dominance GIS Geographic Information System GPS Geographic Positioning System HH Household HIV Human Immunodeficiency Virus ICC Intraclass Correlation Coefficient IFLS Indonesian Family Life Survey KDHS Kenyan Demographic and Health Survey Lit Literate LR Likelihood Ratio LSMS Living Standard Measurement Survey Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access xviii L IST OF A BBREVIATIONS MARA Mapping Malaria risk in Africa NASA National Aeronautics and Space Administration No Number NDVI Normalized Difference Vegetation Index Obs Observations OLS Ordinary Least Squares P0 Poverty Headcount PC Per Capita POP Population PPP Purchasing Power Parity RC Random Coefficient SSA Sub-Saharan Africa Std dev Standard Deviation SE Standard Error Tempmax Maximum Temperature PCA Principal Component Analysis PWT Penn World Tables SSD Second Order Stochastic Dominance U5M Under 5 Mortality UN United Nations UNDP United Nations Development Programme UNICEF United Nations Children’s Fund USD United States Dollar Var Variance WHO World Health Organization WRSI Water Requirement Satisfaction Index WTO World Trade Organization ZD Zone Denombrement Johannes Gräb - 978-3-653-00480-9 Downloaded from PubFactory at 01/11/2019 02:31:01AM via free access