Guidelines for Constructing Consumption Aggregates for Welfare Analysis

By Angus Deaton, Salman Zaidi. 2002

363 citations recorded by the source corpus.

An analyst using household survey data to construct a welfare metric is often confronted with onfronted with An analyst using household survey data to construct a welfare metric is often confronted with a number of theoretical and practical problems. What components should be included in the overall welfare measure? Should differences in tastes be taken into account when making comparisons across people and households? How best should differences in cost-of-living and household composition be taken into consideration? Starting with a brief review of the theoretical framework underpinning typical welfare analysis undertaken based on household survey data, this paper provides some practical guidelines and advice on how best to tackle such problems. It outlines a three-part procedure for constructing a consumption-based measure of individual welfare: 1) aggregation of different components of household consumption to construct a nominal consumption aggregate; 2) construction of price indices to adjust for differences in prices faced by households; and 3) adjustment of the real consumption aggregate for differneces in household composition. Examples based on survey data fro eight countries--Ghana, Vietnam, Nepal, the Kyrgyz Republic, Ecuador, South Africa, Panama, and Brazil--are used to illustrate the various steps involved in constructing the welfare measure, and the STATA programs used for this purpose are provided in the appendix. The paper also includes examples of some analytic techniques used to examine the robustness of the estimated welfare measure to underlying assumptions.

Subfields: Gender Studies

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Citations in the corpus

Airtime transfers and mobile communications: Evidence in the aftermath of natural disasters (2016, positive): “Most relevant to the current analysis, roughly seventy questions were asked about asset ownership and household expenditures, which makes it possible to estimate each household’s annual expenditures in a manner following Deaton & Zaidi (2002).”
The developing world is poorer than we thought, but no less successful in the fight against poverty (2008, neutral): “For further discussion see Ravallion (1994, 2003) and Deaton and Zaidi (2002).”
Productivity Differences Between and Within Countries (2009, positive): “To investigate this concern, we followed the methodology proposed by Angus Deaton and Salman Zaidi (2002) to carefully construct, item-by-item, a comparable measure of household expenditure for a number of countries in the Americas.”
More Relatively-Poor People in a Less Absolutely-Poor World (2012, neutral): “For these reasons, our poverty measures need to 19 For further discussion see Ravallion (1994) and Deaton and Zaidi (2002).”
Growth and Chronic Poverty: Evidence from Rural Communities in Ethiopia (2012, neutral): “Although there are good conceptual reasons for including use values for durables or housing (Deaton and Zaidi, 2002), we do not do so here; the heterogeneity in terms of age and quality of durables owned by our respondents, together with the near complete absence of a rental market for housing…”
The impact of household food consumption data collection methods on poverty and inequality measures in Niger (2014, neutral): “In those situations the ranking of households by income is less robust than the ranking by consumption (Deaton and Zaidi, 2002).”