Assessing Ex Ante the Poverty and Distributional Impact of the Global Crisis in a Developing Country : A Micro-simulation Approach
with Application to Bangladesh

Measuring the poverty and distributional
impact of the global crisis for developing countries is not
easy, given the multiple channels of impact and the limited
availability of real-time data. Commonly-used approaches are
of limited use in addressing questions like who are being
affected by the crisis and by how much, and who are
vulnerable to falling into poverty if the crisis deepens?
This paper develops a simple micro-simulation method,
modifying models from existing economic literature, to
measure the poverty and distributional impact of
macroeconomic shocks by linking macro projections with
pre-crisis household data. The approach is then applied to
Bangladesh to assess the potential impact of the slowdown on
poverty and income distribution across different groups and
regions. A validation exercise using past data from
Bangladesh finds that the model generates projections that
compare well with actual estimates from household data. The
results can inform the design of crisis monitoring tools and
policies in Bangladesh, and also illustrate the kind of
analysis that is possible in other developing countries with
similar data availability.