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Household welfare measurement and the pricing of basic services

  • Jesko Hentschel

    (World Bank, Washington, DC, USA)

  • Peter Lanjouw

Employing total consumption as a household-level welfare indicator with which to measure poverty has often been criticized because it is felt that such an indicator does not account for differing access to, and cost of, publicly provided services. This paper discusses when and how adjustments can be made to expenditures derived from household surveys so as to reflect the consumption of basic services. Markets which are subsidized, rationed and subject to increasing marginal tariff pricing are examined and simple adjustment methods are discussed. Using Ecuador to illustrate the methods, the paper shows that incorporating adjustments in markets for basic services can significantly alter poverty estimates. Including such adjustments into a comprehensive measure of welfare can therefore be important and can also contribute to the wider acceptance and use of consumption as a welfare indicator guiding public policy development. Copyright © 2000 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 12 (2000)
Issue (Month): 1 ()
Pages: 13-27

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Handle: RePEc:wly:jintdv:v:12:y:2000:i:1:p:13-27
Contact details of provider: Web page: http://www3.interscience.wiley.com/journal/5102/home

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  1. Hope, Einar & Singh, Balbir, 1995. "Energy price increases in developing countries : case studies of Colombia, Ghana, Indonesia, Malaysia, Turkey, and Zimbabwe," Policy Research Working Paper Series 1442, The World Bank.
  2. Hentschel, J. & Lanjouw, P., 1996. "Constructing an Indicator of Consumption for the Analysis of Poverty. Principles and Illustrations with Reference to Ecuador," Papers 127, World Bank - Living Standards Measurement.
  3. Lanjouw, Jean Olson & Lanjouw, Peter, 1997. "Poverty comparisons with non-compatible data: theory and illustrations," Policy Research Working Paper Series 1709, The World Bank.
  4. Martin Ravallion & Gaurav Datt, 1995. "Is Targeting Through a Work Requirement Efficient? Some Evidence for Rural India," Monash Economics Working Papers archive-41, Monash University, Department of Economics.
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