Estimating Wealth effects without expenditure Data: Evidence From rural Ethiopia

Course ID
Ethiopian Economics Association (EEA)
Marlieen Dekker

In economic studies, household economic status is usually proxied by measures of consumption or income. In recent years, several studies have advanced an asset-based index as an alternative measure of wealth status. In most studies, the asset-based wealth index is constructed with a standard list of assets comprising household ownership of consumer durables, the characteristics of the household’s dwelling and sometimes household landownership. Although a standard list may be useful when comparing households across countries or urban and rural residents in one country, the assets included may not always be relevant for studies focussing on rural areas or a particular rural area only. This paper addresses the question what assets should be included in the wealth index to the best reflect long-term economic status in rural Ethiopia. We use data from the Ethiopian Rural Household Survey (ERHS) collected in 1994 and 1995 to construct several asset-based wealth indices. We find not all standard assets are relevant locally and signs and heights of factor loadings differ substantially between localities, supporting the case of specified (local) asset listings. The specified asset index performs best compared to other asset indices when considering the distribution of food security across wealth quintiles and is at least as good a predictor of food security as per capita consumption measure for the same households

Corporate Author:Ethiopian Economic Association/Ethiopian Economic Policy Research Institute (EEA/EEPRI)
Publisher:Ethiopian Economic Association (EEA)
Primary Descriptors:Macroeconomics and Monetary Economics – Macroeconomics

Geographic Descriptors:Ethiopia
Cataloge Date:03/02/2013
Broad Subject heading:Wealth
Call Number:330.05 ETH JOU
Serial Key Title:Ethiopian Journal of Economics
Publication catagory:Ethiopian Journal of Economics
Content type:EEA Publication
Year:April, 2006
Publication date:2013-03-02 00:00:00
Forum or Discussion date:2013-03-02 00:00:00
PDF file: marlieen Dekker_ Estimating Wealth effects without expenditure Data.pdf
Place of publication:Addis Ababa, Ethiopia
Type of material:Serial (Journal)
Current frequency:Semiannual
Author: Marlieen Dekker

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