69: Comparing Various Approaches to Create Wealth Index Using Census Microdata

Music City Center 

A wealth index is a measure to determine a households' aggregate living standard and socioeconomic position. In the absence of true information about household wealth, social sciences often construct proxy measures using information about household assets collected in population surveys. Such indices are used to position households in relative terms for studying differences by socioeconomic status. In literature, classical principal component analysis (PCA) has been extensively used to create different wealth indices. The aim of this study is to explore various modifications of the classical PCA approach, such as PCA with tetrachoric correlation matrix, and Sparse PCA with Pearson and tetrachoric correlation matrix to create household asset index using IPUMS International census microdata of developing countries. Spearman's rank correlation along with quintile based ranking of the households is used to compare the consistency of the indices derived using the various methods.

Wealth Index

Census Microdata

Principal Component Analysis

Sparse Principal Component Analysis 

Social Statistics Section