REGIONAL POVERTY ANALYSIS TECHNICAL WORKSHOP Use of income or expenditure data? Kim Robertson (ADB/SPC Regional Poverty Programme Team Leader) REF: Working Paper 2.1

Both have problems Income is understated through non-disclosure (deliberate and accidental Income is understated because it is irregular Some expenditure types are understated (‘forgotten’ items such as bus money, so-called ‘undesirable’ items and activities such as gambling, smoking and alcohol and illicit drugs) Expenditure (consumption) includes imputed rent and a depreciation value for other ‘durable assets’ as they are consumed (or used) during the survey reference period. But as depreciation and date of purchase etc information is not collected in HIES surveys this is not done in PICTs. Both income and expenditure (consumption) is understated because of the low values typically given to home produced and consumed (or given) food and goods.

Approaches Generally considered that expenditure (consumption) is a better reflection of ‘typical’ household resources US and other countries now using income but from ‘usual’ sources – fine where there is regular income from a small number of sources Various other approaches being tried in research

Recommended method Use household expenditure as the measure of a household’s wealth or resources