Measuring Poverty: National Accounts vs Household Surveys

1. Statistical Issues in Measuring Poverty from Non-Survey SourcesNATIONAL ACCOUNTS UN STATISTICS DIVISION Economic Statistics Branch National Accounts Section UNSD/NA/MR 1

2. Is poverty under or over estimated? • Two sources of aggregate welfare data: • National accounts (NA) • Per capita Household final consumption expenditure (HFCE) • Per capita Disposable income of households • Household surveys (HS) • Survey mean of consumption • Survey mean of income • Is survey mean typically lower than per capita HFCE?

3. Income versus expenditure in the poverty concept • Consumption surveys are far better than income surveys for poverty measurement • Households more willing to reveal their consumption rather than their income • Conceptualization of non-wage incomes • Recall periods

4. Some conceptual and measurement issues in National Accounts • Disposable income • Household final consumption • Two concepts • Household final consumption expenditure • Actual final consumption of households

5. Comparability between NA and HS estimate of disposable income • Recording of income of self employed persons • Imputed rent of owner occupied dwellings • Exhaustiveness adjustments • Compilation of disposable income in NA (Table 1.doc)

8. Comparability between NA and HS estimate of household consumption • HS provides information on household consumption at the lowest detailed level but • HS can not be directly used for NA estimates • Conceptual adjustments • Empirical adjustments

9. Conceptual adjustments • Differences in definitions and concepts • Households production for own final consumption • Services of owner occupied dwellings • Income in kind • Financial intermediation services indirectly measured • Insurance and pension fund services • Direct sales and purchases for business purposes • National concept • Diagram 1 (Diagram 1.doc)

11. Empirical adjustments • Differential non-response • High income households • Exhaustiveness • Data confrontation • Retail trade • Enterprise surveys • Others • Diagram 2 (Diagram 2.doc)

13. Actual final consumption of households • Shows who benefits from the consumption • Main objective is to enhance comparability of households final consumption across countries and over different time periods • Consists of : • Final consumption expenditure of households • Social transfers in kind from the Government • Social transfers in kind from NPISHs

14. Relationships between the two concepts

15. International debate on non-compliance between NA and HS surveymeans • Why use national accounts data (Karshenas)? • There is significant relationship between the two measures but it is not always the case that national accounts consumption would be lower than survey-based mean consumption • National accounts-based estimates appear to be more plausible in relation to other non-monetary indicators of poverty • Calibration of survey means by using external NA based information as a scale factor for a removal of discrepancy

16. International debate on non-compliance between NA and HS surveymeans(cont.) • Why prefer household survey data (Deaton)? • Designed to directly measure individual welfare • Yes, under-reporting/non-compliance problems, but probably produce more accurate measure of living standard of the poor • No sound basis for using mean from NA and distribution from household survey for calibration to remove differences.

17. Conclusions • Discrepancy between NA and HS means has important implications for the analysis of poverty • NA data even not used for direct estimation of poverty might be of particular help in case of: • Outdated HS data • Missing HS • Practice of HS needs to be improved and harmonized

18. Thank You