Wealth Index as Substitute to Income and Consumption: Assessment of Household Poverty Determinants Using Demographic and Health Survey Data

Abstract

ABSTRACTWe deviate from standard literature on assessment of household poverty. Contrary to standard practice of using household income and consumption, we use Wealth Index, calculated through Principal Component Analysis (PCA), as measure of poverty. Data from Pakistan Demographic and Health Survey (PDHS) 2006–07, gathered from female respondents, suggests an interplay of several socio-demographic factors underlying the incidence of household poverty. The multivariate analysis shows that household size, dependency ratio, and sex and age of the head of household are significantly associated with poverty status. Higher education lowers the likelihood of poverty while the opposite is true for the dependency ratio. Most interestingly, male headed households are more likely to have poverty-lower wealth index-compared to households headed by female. We also provide evidence that the impact of household characteristics on poverty is sensitive to the area of residence, rural or urban, and different regions. We conclude that DHS data provides an assessment of household poverty which goes beyond economic factors and single dimension measures.