The results of the SAE estimates are presented graphically in the following section. Separate modeling exercises are conducted for each welfare indicator. The model variables that are part of the _X_ vector in the estimation procedure were chosen to maximize the ratio of explained variance to the total variance, as captured by the adjusted R<sup>2</sup> .<sup>4</sup> There is no pre-set group of variables that are guaranteed to achieve that objective. Instead, automated variable selection using the stepwise approach was used. Sensitivity analysis comparing the results to alternative model development approaches (including several variations of the lasso approach) are described in annex I.

# **IV – Results**

Summarizing poverty rates by region (at which the underlying surveys are themselves considered representative) yields a range of between 0 and 27.7 percent at the poverty line for lower middleincome countries ($3.2 PPP per person, per day), and between 0 and 76 percent for the line appropriate for upper middle-income countries ($5.5 PPP per person, per day). But this level of aggregation hides significant variation within regions. When disaggregated to the district level, the resulting poverty estimates for the LMIC line range from 0 percent to 70 percent, and many individual districts register nearly 100 percent poverty rates at the UMIC line, despite a lower average poverty rate in the surrounding region.<sup>5</sup> Poverty rates at the LMIC line are relatively low throughout Kazakhstan and in much of Uzbekistan. However, pockets of high poverty rates remain in the Kyrgyz Republic and in Tajikistan. The parts of the Ferghana Valley within Uzbekistan’s borders have relatively low rates of poverty but nearby districts in the Kyrgyz Republic and Tajikistan with somewhat higher rates of poverty.

Even stronger regional disparities are apparent when using the UMIC line. Poverty by this definition was still less than 10 percent in Kazakhstan in 2017, but this stands in contrast to much higher rates in the Kyrgyz Republic, Tajikistan, and to a lesser extent, Uzbekistan. In Tajikistan and the Kyrgyz Republic there are districts in which nearly all people are poor by the UMIC line, whereas the highest rate in Kazakhstan is 44 percent.

Throughout Central Asia, most of the poor live in the most populated districts, despite the higher poverty rates prevalent in some of the sparsely populated and mountainous regions. The density of the population below the poverty threshold (i.e. the absolute number of poor individuals, obtained as the product of the predicted poverty rate and population of the district) is concentrated in the more densely populated areas in each country. Rural areas are much poorer than urban areas on average, and remote areas have higher average poverty rates. Districts that border on Afghanistan also tend to be poorer. Figures 9-12 (and 17-31) in the following depict each of the welfare indicators derived using the Fay-Herriot approach in this application.

> 4 Adjusted R is chosen instead of (unadjusted) R because the latter is non-decreasing in the number of explanatory variables in the model.

> 5 The district-level estimates are reported in Annexes A-D.

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