Measuring Aggregate Welfare in Developing Countries: How Well Do National Accounts and Surveys Agree?

Abstract

August 2001 The two sources of data on aggregate economic welfare - household surveys and national accounts - can yield different results. How large is this divergence? How is it changing over time? And how does it vary by region? In a data set for developing and transition economies, Ravallion finds that private consumption per capita based on national accounts deviates on average from mean household income or expenditure based on national sample surveys. Growth rates also differ systematically, so that the ratio of the survey mean to the national accounts mean tends to fall over time. But there are revealing exceptions to these general findings. The aggregate difference in the levels is due more to income surveys than to expenditure surveys. And there are strong regional effects; for example, the severe data problems in the transition economies of Eastern Europe and Central Asia mean that there is negligible correlation in that region between growth rates from national accounts and those from household surveys. This paper - a product of Poverty, Development Research Group - is part of a larger effort in the group to investigate the strengths and weaknesses of currently used measures of economic welfare. The author may be contacted at mravallion@worldbank.org.