I am trying to make a very simple UI for less-literate, not so expert users. Is it better to show states, regions, neighbourhoods (in that order) on a popup for the user to select his/her location, or it is better to show it inline on the mobile screen?
You don't state in your question what exposure your app has, or how defined the location needs to be.
However, the best option for less literate users would be to ask them to enter their zip/post code (into a free text field). If your app is across national boundaries, then have the app ask them to select their country first (preferably by a drop-down list or the like - depending on what mobile OS the app is installed on). This gets it down to either a one-step or two step process.
However, if you need it defined moreso than a general postal area (i.e. using zip/postal codes), then it may start getting cumbersome. One option, though, if you need their exact location is to just ask them to enter the physical address of where they're at (or even just the street if you don't need the exact location). Many real estate and ISP apps use this approach to start prefilling the field as users start entering the data.
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