Poverty and Inequality Mapping in Albania: Final Report Gianni Betti, 28 February 2003 Contents: 1. Introduction 2. The data sources 3. Linear regression models with variance components 4. Poverty and Inequality measures Annex 1: Poverty and Inequality Maps Annex 2: Comparison between census and LSMS sources and description of the variables Annex 3: The imputation procedure Bibliography Annex 4: Distributions of the variables (attached Excel file Distributions.xls) 1. Introduction The World Bank, in collaboration with the Department for International Development (DfID), is assisting the Government of Albania in the establishment of a permanent poverty monitoring and policy evaluation system in Albania. The current project aims at creating a reliable and sustainable system of household surveys for the timely production of reliable and relevant statistical information so to assist policy-makers in the design, implementation and evaluation of economic, social and environmental programs. As a part of the activities envisaged under the project, a poverty and inequality mapping analysis, foreseen as part of the project, is being carried out based on the methodology fully described in Elbers, Lanjouw and Lanjouw (2002). This methodology combines census and survey information to produce finely disaggregated maps which describe the spatial distribution of poverty and inequality in the country. 1 In fact, in order to produce poverty and inequality maps, large data sets are required which include reasonable measures of income or consumption expenditure and which are representative or of sufficient size at low levels of aggregation to yield statistically reliable estimates. Household budget surveys or Living Standard Measurement surveys covering income and consumption usually used to calculate distributional measures are rarely of such a sufficient size. Whereas census or other large sample surveys sufficiently large enough to allow disaggregation have little or no information regarding monetary variables. The basic idea is to estimate a linear regression model with local variance components using the information from the smaller and richer data sample, in the Albanian Living Standard Measurement Study (LSMS) conducted in 2002, including some aggregate information from the Population and Housing Census or other sources available for all the statistical units in the sample (i.e. from the General Census of Agricultural Holdings). The vector of covariates utilised in the regression model should be restricted to those variables that can also be linked to households in the census. The estimated distribution of the dependent variable in the regression model (monetary variable) can therefore be used to generate the distribution for any sub-population in the census conditional to the sub-population’s observed characteristics. From the estimated distribution of the monetary variable in the census data set or in any of its sub-populations, an estimate is to be made of a set of poverty measures based on the Foster-Green-Thorbecke indexes (for α=0,1,2), the Sen index and an absolute poverty line calculated using the information contained in the rich sample survey, as well as a set of inequality measures based on the Gini coefficient, the Gini coefficient of the poor and two general entropy (GE) measures, with parameter c=0,1. Moreover, bootstrapping standard errors of the welfare estimates will be computed so as to assess the precision of the estimates. This report is made up of four sections and four annexes. After this introduction, section two is devoted to the comparison and the harmonisation of the data sources, giving special attention to the Census and LSMS data sets. In section three the estimated linear regression models with variance components are reported and there is a full description of how the Montecarlo simulation has been considered in order to prepare the statistical information for calculating bootstrapping standard errors of poverty and inequality measures. Section four reports the above described indices calculated for the whole of Albania and disaggregated at six levels: a) The four strata used in sampling the LSMS; b) The six strata for which we have estimated the linear regression models; c) The 12 Prefectures; 2 d) The 36 Districts; e) The 384 Communes; f) The 11 Mini-municipalities which the city of Tirana is divided into. Annex one reports poverty and inequality maps for Prefectures, Districts, Communes and Municipalities. Annex two fully describes the comparison made between the various data sources and the list of common variables; annex three discusses how we have treated missing information in the LSMS data set, while annex four, consisting of the attached Excel file, reports the distributions of the whole set of variables used in this work. 2. The sources The Republic of Albania is geographically divided into 12 Prefectures. These are divided into Districts which, in turn, are divided into Municipalities and Communes. The Communes contain all the rural villages and the very small cities. The Capital of Albania, Tirana, is also divided into 11 Mini- municipalities. The three main sources of statistical information available in Albania are: The Population and Housing Census (PHC) – 2001. The Living Standard Measurement Study (LSMS) – 2002. The General Census of Agricultural Holdings – 1998 and other sources. 2.1 The Population and Housing Census1 The census was conducted in April 2001, and the moment as reference was considered midnight of 31 March 2001. The 2001 census introduced some essentially new concepts in data collection methods as well as in definitions, mainly the concept of an open population was introduced in order to asses the consequences of emigration and internal migration. For the April 2001 General Census of Population and for Housing census purposes, the cities and the villages have been divided into 9,834 Enumeration Areas (EAs) which were established throughout the country and generally involved about 80-120 dwellings. The fieldwork of the census was based on a four-part questionnaire with questions at four different levels: a) Building questionnaire: to be completed only for the first or only dwelling in the building. 1 INSTAT (2002), The Population of Albania in 2001. 3 b) Dwelling questionnaire: to be completed for all the inhabited dwellings in the building. c) Household questionnaire: to be completed for all the households (if more than one) in the dwelling. d) Individual questionnaire: to be completed for all the members of the household who are present, or absent for less than 1 year (to be defined in the roster). At the end of march 2001 in Albania there were 726,895 households with 3,069,275 persons (1,347,281 in the labour force) living in 512,387 buildings. 2.2 The Living Standard Measurement Study (LSMS) – 20022. The 2002 LSMS was carried out between April and June, with some field activities extending into August and September. The survey work was undertaken by the Living Standards unit of INSTAT (Albanian National Statistics Office), with the technical assistance of the World Bank The Population and Housing Census (PHC) performed in mid-2001, provided the country with a much needed updated sampling frame which is one of the building blocks for the household survey structure. In fact the 9,834 Enumeration Areas formed the basis for the LSMS sampling frame. The final sample design for the 2002 LSMS included 450 PSUs and 8 households in each PSU, for a total of 3600 households. Four reserve units were selected in each sample PSU to act as replacement unit in non-response cases. In a few cases in which the rate of migration was particularly high and more than four of the originally selected households could not be found for the interview, additional households for the same PSU were randomly selected. The sampling frame was divided into four regions (strata), Coastal Area, Central Area, Mountain Area, and Tirana (urban and other urban). These four strata represent the domains of estimation. They were further divided into major cities, other urban, and other rural (Table 1). The EAs were allocated proportionately to the number of housing units in these areas. 2 The World Bank (2002), Basic Information Document, Living Standard Measurement Study, Albania, Development Research Group. 4 Table 1: Domains of Estimation (Regions) Districts and Major Cities in the Domains of Estimation Region 1 Region 2 Region 3 Tirana Coastal area Central Area Mountain Area Districts Lezhë Kuçove Devoll Kukes Tirana urban Kurbin Skrapar Kolonjë Has Tirana other urban ( Other Kavajë Krujë Pogradec Tropoje Urban ) Mallakaster Peqin Mirdite Bulqize Lushnje Gjirokastër Puke Diber Delvine Permet Malesi e Madhe Gramsh Sarande Tepelenë Mat Librazhd Tirana (rural) Major Durres Shkoder Berat Cities Fier Elbasan Korçë Vlore Four survey instruments were used to collect information for the 2002 Albania LSMS: a) Household questionnaire b) Diary for recording household food consumption c) Community questionnaire d) Price questionnaire. 2.3 The General Census of Agricultural Holdings3 and other sources Another important source of information in Albania is the General Census of Agricultural Holdings; according to the approved calendar, the household interviewing process started on the first of June 1998. The census was accomplished by means of a direct interview with the manager (owner) of agricultural households. The census was extended to 466.809 agricultural holdings (private and public), 2968 villages and cities, 368