GCRF: Pseudo-Panels for Long Period Analysis of African Household Surveys

National household surveys have become the standard source of data for analysis of poverty in developing countries. A major limitation of these surveys for Africa, in terms of the potential to analyse poverty dynamics, is that they are not a panel - different households are surveyed in each wave so they constitute repeated cross sections. It is therefore not possible to track the same households over time to investigate the drivers of poverty reduction. This creates challenges for analysis with endogenous variables, such as interactions between household size and poverty or migration, remittances and household income. The absence of a panel also limits analysis of determinants of household welfare over long periods.

The strategy we propose to address this data restriction is to identify representative household types to construct pseudo panels making use of the repeated cross section household surveys (see the Case for Support). Analysis of the pseudo panel allows one to track similar households and complements household-level analysis for each survey. The project will develop methods for constructing pseudo-panels that can be applied, with suitable modifications for specific features of the surveys, in any country with three or more national household surveys. In principle, the methods are also applicable to census and Demographic and Health Survey data. Although the project focuses on Uganda (1992-2012 using eight existing surveys), the methods for constructing and analysing pseudo-panels can be applied to other African countries. Utilising established links with local research partners, hence largely 'off-budget', the pseudo-panel method will be applied to Ghana (1991-2013 using 6 surveys) and Tanzania (1991-2012 using 4 surveys).These three countries all have managed to roughly halve headcount poverty since the early 1990s.

We use the repeated cross-section survey data to form a pseudo panel of 'representative' households by grouping individual households (the observational units) into cohorts on the basis of time invariant characteristics (location, gender and birth cohort of household head). The cohorts are then traced over time as they appear in successive surveys, forming a pseudo panel with 'lagged values'. As the cohort fixed effect is correlated with cohort (household) characteristics that are unobserved and not constant over time due to the changing membership of the cohorts in each survey, an errors-in-variables estimator is used to correct the cohort means as estimates of the unobservable population means. The lagged dependent variable is constructed from an auxiliary regression with an augmented instrumental variables estimator using time-invariant instruments. The pseudo panel therefore permits a long (20 years or more) analysis of determinants of household welfare and poverty reduction, with the potential to generate internal instruments for endogenous variables and to identify effects of policy changes (such as Universal Primary Education in Uganda).

The project is expected to make a number of contributions. First, methods for constructing and using pseudo-panels will be developed, tried and tested generating a transferable method of potential use for most developing countries, especially in Africa where there are many surveys but few panels. Second, the pseudo-panel will be used to provide new insights on the drivers of poverty reduction in Uganda, with more limited applications (during the life of this project) to Ghana and Tanzania. Third, through training and research collaboration we will support building research capacity in Africa (specifically Uganda). To support these aims, an inception workshop in Kampala will include a variety of stakeholders with focus groups to identify the important research and policy issues; there will be dissemination in country and through AERC; and training will be provided to local researchers.

The dissemination strategy to ensure impact will target three main groups: academic researchers (addressed under academic beneficiaries); government officials and donors concerned with devising effective national poverty reduction strategies; NGOs and civil society communities concerned with poverty. Co-ordinated strategies will be used to target the latter two groups.

The inception meeting with stakeholders in Kampala at the start of the project (possibly March 2017 but no later than May) will help determine the core questions to be addressed in the econometric analysis for Uganda (consultation with local researchers will identify issues for Ghana and Tanzania). The intention is to invite 50 participants to the workshop and hold a series of focus group meetings afterwards (with officials, researchers and NGOs). We will explain the benefits of the pseudo-panel for long period analysis and discuss with participants what issues should be addressed (e.g. are particular groups, regions or sectors of economic activity of special importance). The focus groups will provide more detailed information for the design of the research. Obviously, stakeholders may have some concerns that cannot be addressed given the data but we will identify feasible and relevant research questions and issues.

We have a number of contacts in Kampala who can assist in identifying participants for the workshop and focus groups. The PI (Morrissey) has 20 years research experience in Uganda; two of his PhD students are now at Makerere University and another is with the Bank of Uganda and all are willing to assist in identifying officials and researchers to engage in the stakeholder workshop and focus groups. A colleague at Nottingham, Dr Trudy Owens, has extensive links with NGOs in Uganda through over a decade of research; she surveyed NGOs in 2002 and 2008 and has plans for another survey, so does have a list of registered NGOs with contact details (there are some 1000 listed on the Ministry of Internal Affairs NGO Registration List, but most of these are very small and/or specialized or inactive). Through a recent project fitting orthotic equipment she has excellent links with the major umbrella disability NGOs, the National Union of Disabled People in Uganda (NUDIPU) and the Uganda National Action on Physical Disability (UNAPD). The NGOs can offer important contributions to the issues to be addressed in the research as although they lack research capacity they request policy relevant research and analysis. For example, disability NGOs in Uganda lament the lack of quantitative data on the welfare status of (households with) disabled persons. These established local contacts ensure the feasibility of active participation in the workshops and take-up of the research.

The primary channel to disseminate to stakeholders will be the workshop in Kampala in 2018, to which we will invite the stakeholders who attended the inception meeting. In conjunction with this, a number of Policy Briefs will be prepared summarising results on a number of particular policy areas (some for government officials, some for NGOs - the number and topics will be determined after the inception meetings). These will be co-produced with the Ugandan researcher (who will visit Nottingham for six weeks in late 2017), where appropriate and feasible in consultation with local stakeholders.

As a core objective is to provide methods for constructing and estimating pseudo-panels, the dissemination workshop will be followed by a one-week training workshop at Makerere University delivered by the CI (Khan) with the Ugandan researcher. We envisage ten Ugandan participants and will invite two participants from each of Kenya and Tanzania. This will build local capacity to continue research using the methods developed and sustain impact for policy and stakeholders. Other capacity building and dissemination will take place through presentations at AERC and the University of Ghana.