Using synthetic panel methods to measure poverty dynamics and vulnerability

DEEP’s User Manual and Stata .do files to guide and facilitate the measurement of poverty dynamics

Ending poverty in all its forms by 2030 requires implementation of efficient poverty reduction and prevention strategies. These strategies need to be based on an understanding of who is poor, the nature of poverty (chronic or transient), how the profile of those living in poverty changes over time, and who is at risk of falling into poverty. Normally, we can only investigate such changes over time with longitudinal or panel data. However, in many cases, these are not available or suffer from respondent attrition and small sample sizes.

Nevertheless, new methodologies like the synthetic panel method can help researchers to gain insights into poverty and vulnerability dynamics in the absence of panel data. This methodology, based on repeated cross-sections, provides a methodological approach to assessing poverty dynamics at a fraction of the cost of panel-based approaches, and often more frequently than real panel analysis.

Our team has developed a User Manual and two accompanying Stata .do files (synthetic_panel_dofile and synthetic_panel_vulnerability_dofile) to guide users who want to apply the synthetic panel method to obtain information on poverty mobility, such as estimates of chronic and transitory poverty, from cross-sectional data. The .do files have been written to facilitate the estimation of the likelihood of different poverty transitions. For example, using data from two time periods, the synthetic panel method estimates the likelihood that households living in poverty in one time period may escape poverty in the next time period. Equally, the method can estimate the probability that a household living in poverty in the first time period remains in poverty in the next time period (i.e. experiences chronic poverty). Finally, the User Manual and .do files can also be used to identify households that are vulnerable to falling into poverty.

Access the User Manual and Stata .do files in full here: https://povertyevidence.org/resources/manual-for-the-estimation-of-a-synthetic-panel-and-vulnerability-analysis/