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Retooling poverty targeting using out-of-sample validation and machine learning

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  • Mcbride,Linden
  • Nichols,Austin
Abstract
Proxy means test (PMT) poverty targeting tools have become common tools for beneficiary targeting and poverty assessment where full means tests are costly. Currently popular estimation procedures for generating these tools prioritize minimization of in-sample prediction errors; however, the objective in generating such tools is out-of-sample prediction. This paper presents evidence that prioritizing minimal out-of-sample error, identified through cross-validation and stochastic ensemble methods, in PMT tool development can substantially improve the out-of-sample performance of these targeting tools. The USAID poverty assessment tool and base data are used for demonstration of these methods; however, the methods applied in this paper should be considered for PMT and other poverty-targeting tool development more broadly.

Suggested Citation

  • Mcbride,Linden & Nichols,Austin, 2016. "Retooling poverty targeting using out-of-sample validation and machine learning," Policy Research Working Paper Series 7849, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7849
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    References listed on IDEAS

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    1. David Coady & Margaret Grosh & John Hoddinott, 2004. "Targeting of Transfers in Developing Countries : Review of Lessons and Experience," World Bank Publications - Books, The World Bank Group, number 14902.
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