Exploring Alternative Measures of Welfare in the Absence of Expenditure Data

Abstract:     
We consider an asset-based alternative to the standard use of expenditures in defining well-being and poverty. Our primary motivation is to see if there exist simpler and less demanding ways to collect and analyze data to measure economic welfare and rank households. This is particularly important in Africa and other poor regions where there is limited capacity to conduct consumption and expenditure surveys and to collect price data, and consequently where reliable data (including valid deflators) necessary to make inter-temporal and inter-regional poverty comparisons is scarce. We evaluate an index derived from a factor analysis on household assets using multipurpose surveys from ten countries. We find that the asset index is a valid predictor of what is arguably the most crucial manifestation of poverty - child malnutrition. Further, indicators of relative measurement error show that the asset index is measured as a proxy for long-term wealth with less error than expenditures.

Accepted Paper Series