Cross-Population Comparability and PPPs: Using Micro-Data on Indicators of Consumer Durables

Ajay Tandon, Harvard University
Angelica Sousa, World Health Organization (WHO)
Emmanuela E. Gakidou, Harvard University
Christopher J.L. Murray, World Health Organization (WHO)

This paper addresses the issue of cross-population comparability of economic status indices estimated from household-level indicator variables on consumer durables using latent variable statistical models. The problem is similar to the one faced in estimation of PPPs. The same basket of consumer durables need not imply the same level of economic status across countries. This is because, even for the same level of the true economic status, the likelihood of ownership of a given consumer durables is not the same across countries. This may be due to different prices structures, preferences, or other environmental factors. We propose one way of making the estimates of economic status comparable across countries. This enables us to estimate economic status on a common scale across countries. We apply the model to indicator-variable data from DHS. The results seem promising: there is a high degree of association between the economic status index and PPP-based economic status measures from other sources.