Transcript NON-INCOME POVERTY IN HOUSEHOLD SURVEYS Poverty & Inequality Group Development Research Group The World Bank Poverty and Inequality Course Module 1: Multi-Topic Household Surveys 03/08/2013

NON-INCOME POVERTY IN
HOUSEHOLD SURVEYS
Poverty & Inequality Group
Development Research Group
The World Bank
Poverty and Inequality Course
Module 1: Multi-Topic Household Surveys
03/08/2013
Consumption/income
• Traditional measure for poverty
– Consumption
• Detailed list of food and non-food consumption items
• Diary or recall method
– Income
• Detailed information on all source of income including wage and
non wage work, farm and non-farm work
• Also includes remittances, rental income, and pensions
• Consumption is more commonly used to measure
poverty headcount than income
• Full/Complete consumption used to measure
– Poverty headcount
– MDG #1 ($1/day)
– Private consumption for National Accounts
When you can’t or don’t need to
collect complete consumption
• Consumption expenditure data is notorious for being
difficult to collect in household surveys – often requiring
a disproportionate amount of the total interview time
• Shorter consumption modules: cheaper and easier
– Reduce time to complete the interview
• length of fieldwork
• Respondent and interviewer burden/fatigue
• “cost” to interviewers of questionnaires with lots of pages
• Shorter consumption modules can be used to
– To rank households: identify poorer from richer
households
or
– To approximately identify “poor” households
Non-monetary indicators
•
There are other dimensions of poverty apart from
insufficient income or consumption
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Use of proxy indicators
•
Correlates of consumption can be used to evaluate
welfare status of households and rank poverty status
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Assets
Health status
Education level
Access to public services
Housing conditions
Level of indebtedness
Unemployment
Outline
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Partial consumption/Income
Asset Indices
Subjective wellbeing
Multidimensional poverty
PARTIAL
CONSUMPTION/INCOME
Partial Consumption/income
• Shorter list of consumption items
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Subset list of items from mean of 75 food items in LSMS (mean of 130
total consumption items)
Collapsed list of items into broader categories. Example: Susenas short
form collapses over 100 items into 15 items
• Take top 10 food items with respect to share in total food
expenditure.
– A shorter food module, down to 1 page from several.
• But excluding rare or infrequently consumed items may not
reduce interview time by much at the mean.
– Tanzania
• 49 minutes for 7-day food recall, 58 food items
• 41 minutes for 7-day food recall, 17 food items (subset)
ASSET INDICES
Asset index
• Can be used to characterize household economic
status in the absence of expenditure and income data
• An aggregate index is constructed based on consumer
durable assets owned by household members, along
with a set of housing characteristics
– Note: this is not wealth in the formal sense of the value of household
assets owned minus liabilities.
• Data used to construct asset indices are simple to collect and are
frequently available
• Stata code
– factor var_1 var_2 var_3
predict new_var
• It is better to choose assets with same unit. Be careful when mixing
different unit like counts and binary variables
Asset index
• The main proponents of this measure are Filmer and Pritchett
– Filmer and Pritchett overcome the lack of data on income and
consumption expenditures in DHS surveys by constructing a proxy for
long-run household wealth, using survey information on assets and using
the statistical technique of principal components.
• Deon Filmer and Kinnon Scott. 2012.“Assessing Asset Indices”
Demography 49 (1):359-92
• Compare these alternative approaches to welfare measurement
– Overlap between “consumption” and “index” approaches
– Implication for the analysis of welfare gradients
– Correlates of the congruence between approaches
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Overlap in the classification in the poorest quintiles
Reasonable, but not “perfect”, match between rankings:
Asset indices highly related to each other, less congruence with PCE
Per Capita HH
expend
Predicted per
capita HH
expend.
PC index, all
indicators
PC index,
assets only
IRT index
(1)
(2)
(3)
(4)
(5)
Share weighted
Count index
average
(6)
(7)
PC value of
durable goods
(8)
Proportion of the population classified in the poorest 20 percent by per capita expenditure who are in the poorest 20 percent
according to other welfare indices
Albania
1
0.47
0.42
0.41
0.41
0.37
0.38
Brazil
1
0.68
0.64
0.62
0.63
0.57
0.63
Nicaragua
1
0.56
0.51
0.46
0.5
0.48
0.49
Uganda
1
0.52
0.48
0.43
0.51
0.47
0.48
Vietnam
1
0.54
0.49
0.5
0.47
0.49
0.48
Note: Blank entry indicates that data are not available . Cross country averages are weighted
0.47
0.52
0.49
Asset index
• Findings
– Reasonable, but not “perfect”, match between rankings
– Inferences about inequalities in education, health care use, fertility,
child mortality, labor market outcomes are quite robust
– Rankings are most similar in settings with small transitory shocks to
expenditure, or with little random measurement error in
expenditure.
– In settings where private goods such as food are the main
component of expenditures, asset indices and per capita
consumption yield the least similar results.
• Asset index may do well when we are not able to measure consumption
very well. For example in urban areas where we can have a lot of
underreporting of consumption. In such instances, assets which are more
observable could do better.
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SUBJECTIVE WELLBEING
Subjective Wellbeing (SWB)
• SWB concerns peoples’ self-reported assessment of their
own well-being.
– sometimes questions are asked about the household from
one individual.
– Could be historical or refer “current” situation
• Three broad approaches have been identified when
measuring subjective well-being;
– Evaluative
• Cantril ladder
– Experience
– Eudemonic
Subjective Wellbeing (SWB)
• SWB provides a wider focus than income/consumption levels
alone.
• Could be directly related to poverty or less clearly linked to
poverty
– Self-reported poverty (Are you poor on scale of 1-6)
– Self-reported wellbeing (less clearly linked to the word "poor") for
example subjective reporting of health status, welfare, satisfaction of life,
etc
• Subjective poverty line (SPL) (Pradhan and Ravallion 2000)
– questions on the perceived adequacy of (food or total) household
consumption
– SPL is ‘the level of total spending above which respondents say (on
average) that their expenditures are adequate for their needs’.
Subjective Wellbeing (SWB)
• Example of SWB questions
Overall, how satisfied are you with your life nowadays?
Do you feel poor?
Overall, how happy did you feel yesterday?
Minimum income question (MIQ): is a subjective survey question
designed to directly assess the delicate balance between what people
earn and what they spend. The question reads, "Living where you do
now, what is the smallest income you and your family would need
(before any deductions) to make ends meet each month?“
– Cantril ladder: Rate your current life on a ladder scale for which 0 is
‘the worst possible life for you’ and 10 is ‘the best possible life for
you’.
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Subjective Wellbeing
• SWB does not necessarily correlate with increased
standard of living
• The Easterlin paradox: Average happiness do not
increase as countries grow wealthier
• Studies have found that in some rich countries,
happiness has not grown along with living standards
– Relative nature
– Increase living standards
temporary happiness
Subjective Wellbeing
• How well do subjective wellbeing correlate with the
objective income measure?
– Cojocaru and Diagne (2013) find weak correlation
between subjective relative income and household relative
welfare position as measured by consumption or assets in
Central Asia and Europe.
– Alem et al (2012) also find that while consumption poverty
has declined in Ethiopia, subjective poverty remains largely
unchanged
Subjective Wellbeing (SWB)
• Problem of different scales across people - one person’s
standard of welfare may be different from another person’s
standard
– Married individuals
– Single
– Urban
• People may not be consistent overtime. (Kahneman 2010)
– not explained by any material change
– the response on Friday may be diff from Monday
Subjective Wellbeing
• Responses can be affected by
– Wording of question
– Context of question
• Some factors can affect perception
– Previous poverty status can affect current perception
– Relative economic standing
– Being engaged in any kind of income-generating job
• Hypothetical vignettes:
– Respondents score a set of vignettes describing different scenarios related
to the topic (such as poverty status) for a hypothetical person/household
– Vignettes can help reveal the respondents’ own scale
Subjective Wellbeing: Guatemela
Subjective Wellbeing: References
• A. Deaton and A. Stone. 2013. “Two happiness puzzles”
Forthcoming, American Economic Review
• Alexandru Cojocaru , and Mame Fatou Diagne. 2013. “
How Reliable and Consistent Are Subjective Measures of
Welfare in Europe and Central Asia? Evidence from the
Second Life in Transition Survey” World Bank Working
Paper
• Yonas Alem, Gunnar Köhlin and Jesper Stage. 2012. “ The
Persistence of Subjective Poverty in Urban Ethiopia”
Working paper in economics, University of Gothenburg
Subjective Wellbeing: References
• Beegle, Kathleen, Kristen Himelein and Martin Ravallion. 2012.
“Frame-of-Reference Bias in Subjective Welfare Regressions.”
Journal of Economic Behavior and Organization 81:556-570.
• Daniel Kahneman1 and Angus Deaton (2010). “High income
improves evaluation of life but not emotional well-being”
• King, G., C. J. L. Murray, J. A. Salomon, and A. Tandon. 2004.
“Enhancing the Validity and Cross-Cultural Comparability of
Measurement in Survey Research.” American Political Science
Review, 98.1, pp. 191-207
Subjective Wellbeing: References
• Pradhan, M. and Ravallion, M. (2000) “Measuring poverty using
qualitative perceptions of consumption adequacy,” The Review of
Economics and Statistics, 82(3), pp. 462–71.
• Daniel Kahneman and Alan B. Krueger (2006) “Developments in the
measurement of subjective well-being” The Journal of Economic
Perspectives, 20, 3-24
• Gero Carletto and Alberto Zezza (2006) “Being Poor, Feeling
Poorer: Combining Objective and Subjective Measures of Welfare in
Albania”
• King, G. and J. Wand. 2007. “Comparing Incomparable Survey
Responses: Evaluating and Selecting Anchoring Vignettes.” Political
Analysis, 15, pp. 46-66.
MULTIDIMENSIONAL
POVERTY
Multidimensional Poverty
• Poverty is not just about income, it is made up of several
factors
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Poor health
Limited access to education
Life expectancy
Lack of income
Inadequate living standard
Limited access to information and knowledge
Lack of empowerment
• A multidimensional measure of poverty can incorporate
these different factors/indicators to capture the complexity
of poverty and better inform policies to relieve it.
Multidimensional Poverty Index
• Developed by James foster and Sabrina Akirie
– Under the Oxford Poverty & Human Development Initiative and the
United Nations Development Program
– Newer version of the human development index (HDI)
• They use two forms of cutoffs to identify the poor
– First- Traditional dimension-specific deprivation cutoff, which identifies
whether a person is deprived with respect to that dimension.
– Second- Poverty cutoff which delineates how widely deprived a person
must be in order to be considered poor.
• The methodology allows for
– Decomposability - Poverty identification for subgroups of the population
– Allows identification of dimensional deprivations that contributes the most to
poverty for any given group
Multidimensional Poverty
• Multidimensional poverty index (MPI)
– Uses 3 dimensions
• Health: Nutrition and Child mortality
• Education: Years of schooling and Schooling attendance
• Living standards: Cooking fuel, Sanitation, Water, Electricity, Floor, Assets
• MPI reveals not only how many people are poor but also the
composition of their individual poverty
• A person is multidimensionally poor if he or she is deprived in at
least one third of weighted indicators
• Provides one number by which countries can be ranked using a
simple tool
– MPI = H * A
– H: Percentage of people who are “multidimensionally” poor
– A: Average intensity of MPI poverty across the poor (%)
Multidimensional Poverty
• Limitation of multidimensional indices
• Uses relative weights for each dimension, which are generally
chosen somewhat arbitrarily by the analyst.
• Ravallion (2011) suggests a “dashboard approach” with a set
of “multiple indices” that measure various dimensions of
poverty rather than a single ‘multidimensional index’”
• Ferreira and Lugo (2012) look at the pros and cons of the
single index versus “dashboard approach”
Multidimensional Poverty: References
• Sabina Alkire and James Foster (2011) “Counting and
multidimensional poverty measurement”, Journal of
Public Economics 95: 476–487)
• Francisco Ferreira and Maria Ana Lugo (2012)
“Multidimensional poverty analysis: Looking for a middle
ground” ECINEQ working papers
• Ravallion, Martin (2011): “On multidimensional indices of
poverty”, Journal of Economic Inequality, 9 (2): 235-248.
A few final thoughts
• Other options for measuring poverty
• When conducting smaller surveys:
– It is good to have a handful of comparable
questions to a larger/national survey.
– It helps with external validity.
– Allows survey to survey imputation
THANK YOU