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Should Consumption Sub-Aggregates be Used to Measure Poverty?

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  • Ligon, Ethan
  • Christiaensen, Luc
  • Sohnesen, Thomas P

Abstract

Frequent measurement of poverty is challenging, as measurement often relies on complex and expensive expenditure surveys that try to measure expenditures on a comprehensive consumption aggregate. This paper investigates the use of consumption "sub-aggregates" instead. The use of consumption sub-aggregates is theoretically justified if and only if all the Engel curves are linear for any realization of prices. This is very stringent. However, it may be possible to empirically identify certain goods that happen to have linear Engel curves given prevailing prices, and when the effect of price changes is small, such a sub-aggregate might work in practice. The paper constructs such linear sub-aggregates using data from Rwanda, Tanzania, and Uganda. The findings show that using sub-aggregates is ill-advised in practice as well as in theory. This raises questions about the consistency of the poverty-tracking efforts currently applied across countries, since obtaining exhaustive consumption measures remains an unmet challenge.
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Suggested Citation

  • Ligon, Ethan & Christiaensen, Luc & Sohnesen, Thomas P, 2020. "Should Consumption Sub-Aggregates be Used to Measure Poverty?," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt9b9929jh, Department of Agricultural & Resource Economics, UC Berkeley.
  • Handle: RePEc:cdl:agrebk:qt9b9929jh
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    References listed on IDEAS

    as
    1. Talip Kilic & Thomas Pave Sohnesen, 2019. "Same Question But Different Answer: Experimental Evidence on Questionnaire Design's Impact on Poverty Measured by Proxies," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(1), pages 144-165, March.
    2. Beegle, Kathleen & De Weerdt, Joachim & Friedman, Jed & Gibson, John, 2012. "Methods of household consumption measurement through surveys: Experimental results from Tanzania," Journal of Development Economics, Elsevier, vol. 98(1), pages 3-18.
    3. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
    4. Jean Olson Lanjouw & Peter Lanjouw, 2001. "How to Compare Apples And Oranges: Poverty Measurement Based on Different Definitions of Consumption," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 47(1), pages 25-42, March.
    5. Pape,Utz Johann & Mistiaen,Johan A., 2018. "Household expenditure and poverty measures in 60 minutes : a new approach with results from Mogadishu," Policy Research Working Paper Series 8430, The World Bank.
    6. Astrid Mathiassen, 2013. "Testing Prediction Performance of Poverty Models: Empirical Evidence from U ganda," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59(1), pages 91-112, March.
    7. Luc Christiaensen & Peter Lanjouw & Jill Luoto & David Stifel, 2012. "Small area estimation-based prediction methods to track poverty: validation and applications," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(2), pages 267-297, June.
    8. Kathleen Beegle & Luc Christiaensen & Andrew Dabalen & Isis Gaddis, 2016. "Poverty in a Rising Africa," World Bank Publications, The World Bank, number 22575, November.
    9. Angus Deaton & Salman Zaidi, 2002. "Guidelines for Constructing Consumption Aggregates for Welfare Analysis," World Bank Publications, The World Bank, number 14101, April.
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