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Abstract
The recent international financial crisis and the steady decrease in development
assistance have put many poor countries under increasing pressure to target more
accurately their public spendings at the poor and the population in need. However,
further progress is hampered by the lack of accurate and operationally reliable methods
for identifying the targeted population affected by poverty. Therefore, this paper
develops low cost and fairly accurate models for improving the targeting efficiency of
development policies. Using household-level survey data from Malawi, this research
applies various econometric methods along with out-of-sample tests to develop
operational poverty targeting models for the country. Though there is a scope for
further improvements, the results show that the developed models can considerably
improve the poverty outreach of development policies compared to the currently used
targeting mechanisms in the country. Likewise, this research can be replicated in other developing countries.