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Prices, Unit Values and Local Measurement Units in Rural Surveys: an Econometric Approach with an Application to Poverty Measurement in Ethiopia

  • Bart Capéau
  • Stefan Dercon

For many research problems in developing countries, some information on prices faced by households is required, for example if subsistence consumption is a substantial part of consumption. These prices are not readily available from household surveys, and at times they are not easily observed, for example if markets are thin and systematic price information can only be observed from markets some distance away from communities. Furthermore, quantities consumed and produced are often in local units presenting further problems for the analysis. We provide an econometric approach to estimate prices and quantity conversion factors from household expenditure data, using data from rural Ethiopia to illustrate the approach. In an application, we show that the conclusions about poverty changes over time are significantly affected by using alternative strategies to convert local units and to value subsistence consumption. We find in our case that mean unit values result in the overestimation of prices due to outliers and other sources of measurement error. Exogenous consumer price sources, often collected at larger markets outside the village, tend to give slightly lower values than our estimates.

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Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces9818.

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Date of creation: Mar 1998
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Handle: RePEc:ete:ceswps:ces9818
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  1. Deaton, A., 1988. "Quality, Quantity, And Spatial Variation Of Price," Papers 30, World Bank - Living Standards Measurement.
  2. Levin, Carol E., 1991. "Rural Household Data Collection in Developing Countries: Designing Instruments and Methods for Collecting Consumption and Expenditure Data," Working Papers 128151, Cornell University, Department of Applied Economics and Management.
  3. Ravallion, Martin & Bidani, Benu, 1994. "How Robust Is a Poverty Profile?," World Bank Economic Review, World Bank Group, vol. 8(1), pages 75-102, January.
  4. Christopher B. Barrett, 1996. "Market Analysis Methods: Are Our Enriched Toolkits Well Suited to Enlivened Markets?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 825-829.
  5. Deaton, A., 1988. "Price Elasticities From Survey Data: Extensions And Indonesian Results," Papers 138, Princeton, Woodrow Wilson School - Development Studies.
  6. Glewwe, Paul, 1990. "The measurement of income inequality under inflation : Correction formulae for three inequality measures," Journal of Development Economics, Elsevier, vol. 32(1), pages 43-67, January.
  7. Strauss, John, 1982. "Determinants of food consumption in rural Sierra Leone : Application of the quadratic expenditure system to the consumption-leisure component of a household-firm model," Journal of Development Economics, Elsevier, vol. 11(3), pages 327-353, December.
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