Guidelines for Constructing Consumption Aggregates for Welfare Analysis (LSMS WORKING PAPER)

Poverty is a complex issue involving multiple aspects of deprivation, of which the lack of goods and services is only one. There is, however, consensus on the importance of using a consumption aggregate as a summary measure of living standards. Despite the widespread use of consumption aggregates, there are few guidelines on how to construct consumption aggregates from survey data.This book presents a review of the theoretical framework fundamental to the use of the consumption aggregate as a welfare measure. It offers some practical guidelines and outlines a three-part procedure for constructing a consumption-based measure of individual welfare. This book contains examples based on survey data from Ghana, Vietnam, Nepal, the Kyrgyz Republic, Ecuador, South Africa, Panama, and Brazil.