1 Poverty Maps of Iran Majid Einian 1 , Davood Souri 2 Abstract Poverty maps are shown to be of the best tools in economic policy design in poverty alleviation programs. This study uses small area estimation method to calculate the poverty headcount ratio for rural and urban areas of 397 counties of Iran. We use the “Household Expenditures and Income Survey” (HEIS) 2014 by “Statistical Center of Iran” (SCI), and 2011 Census (a 2% random sample), and some macro county- and province-level data to build models to estimate household per capita expenditures. 60 urban/rural provincial regions are divided into 13 clusters using k-means clustering method. For each of these clusters a model is built to estimate the expenditures. As usual in small area methods, we use survey data to estimate the model parameters and apply the model to census data to estimate the desired variable for each household. Regional poverty headcount ratio is then calculated for each of 794 urban/rural regions of counties. Keywords: Small Area Estimation, Bayesian Variable Selection, Household Expenditures and Income Survey, Census Data JEL classification: C11, I32, Y91 Introduction In the last two decades there has formed a consensus among development economists that although economic growth is the necessary condition to decrease poverty, it is not enough. Based on this view, the basic needs of poor households should be provided by government programs so they can have the chance to contribute to the development process. Such government programs need identifying and targeting the poor (Coady, Growsh & Hoddinott 2004). International studies on welfare programs show that most of them use poverty maps in designing a well-targeted program (IMPS 2014). Aggregate measures often conceal important differences among regions of a country. Thus studying poverty and factors affecting it, and any poverty-alleviating programs need to be done at smaller geographical areas. Measuring and displaying such information are known as poverty maps. Understanding the importance of poverty maps, the last two decades has seen important international efforts on this subject. 1 PhD Candidate, Graduate School of Management and Economics, Sharif University of Technology; and Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran. Email: einian85@gmail.com 2 Advisor to the CEO at Saman Bank, Economics PhD.