Individual Welfare Index: a Complement of GDP per Capita for Comparing Individual Welfare of Urban and Rural Areas

Abstract

Abstract The idea of developing an Individual Welfare Index (IWI) emanated from the criticisms raised against using Gross Domestic Product (GDP) per capita to compare living standards of urban and rural areas. There is evidence that good measures of welfare have to encompass both objective and subjective indicators where little has been empirically known. The specific objective of this paper was to propose a framework for developing an IWI that combines both subjective and objective aspects in an attempt to provide a satisfactory measure of individual welfare. The data were collected from 40 respondents aged 18–60 years within the randomly selected 20 households (i.e., two respondents in a household) using a structured questionnaire. The results showed that, the framework of welfare components were reliable to develop the IWI (Cronbach-Alpha ≥ 0.7) and that the computed IWI were 55.9 and 51.0 in the regions with the highest (about 3,000,000 TZS) and lowest (about 1,000,000 TZS) GDP per capita, respectively. It is concluded that, a satisfactory measure of welfare when comparing welfare performances in urban and rural areas, should include both objective and subjective welfare measures.