Enhancing Poverty Targeting with Spatial Machine Learning: An application to Indonesia

Abstract

This study leverages spatial machine learning (SML) to enhance the accuracy of Proxy Means Testing (PMT) for poverty targeting in Indonesia. Conventional PMT methodologies are prone to exclusion and inclusion errors due to their inability to account for spatial dependencies and regional heterogeneity. By integrating spatial contiguity matrices, SML models mitigate these limitations, facilitating a more precise identification and comparison of geographical poverty clusters. Utilizing household survey data from the Social Welfare Integrated Data Survey (DTKS) for the periods 2016 to 2020 and 2016 to 2021, this study examines spatial patterns in income distribution and delineates poverty clusters at both provincial and district levels. Empirical findings indicate that the proposed SML approach reduces exclusion errors from 28% to 20% compared to standard machine learning models, underscoring the critical role of spatial analysis in refining machine learning-based poverty targeting. These results highlight the potential of SML to inform the design of more equitable and effective social protection policies, particularly in geographically diverse contexts. Future research can explore the applicability of spatiotemporal models and assess the generalizability of SML approaches across varying socio-economic settings.