An Application of the Asset Index for Measuring Household Living Standards in Thailand

Abstract

This study aimed to explore the correlation between results using alternative methods to categorize households into different socio-economic groups, ranking by income and by the asset index. Data were used from the national household socio-economic surveys (SES) in 2000, 2002 and 2004. The asset index was developed using Principal Component Analysis (PCA) to assess the weight or "factor score" of each asset. Household assets in the 2000-2004 SES ranged from 28 to 30 variables.

Results revealed that there was internal coherence between the three years of data. Households in higher asset quin-tiles typically owned assets with a high factor score and a low mean value of availability, while households in lower quin-tiles did not. The assets with the top-three factor scores in 2000 and 2004 were washing machine, telephone, and refrigerator, while the assets with the top-three scores in 2002 were washing machine, telephone, and video recorder. In all three years, households in the first asset quin-tile (the poorest) had no air conditioners while 51% of households in the fifth (the richest) quin-tile owned air conditioners in 2000, increasing to 52% in 2002 and 61% in 2004. The correlations between household quin-tiles classified by the asset index and by household income / expenditure ranged from 0.51 to 0.55, and the correlations were higher in the first and fifth quin-tiles than in the middle categories.

In conclusion, the asset index can be used as an alternative tool to classify household socio-economic status in Thailand. Due to changes in household assets over time, regular revision of information on household assets included in the national household surveys can improve the ability of the asset index in reflecting household living standards and socio-economic status.

Keywords: Asset index, living standards, socio-economic status, household income, household expenditure, Principal Component Analysis

JEL Classification: D63, I32