TY - JOUR

T1 - Using sparse categorical principal components to estimate asset indices

T2 - new methods with an application to rural southeast asia

AU - Merola, Giovanni Maria

AU - Baulch, Bob

N1 - Publisher Copyright:
© 2018 John Wiley & Sons Ltd

PY - 2019/5

Y1 - 2019/5

N2 - Asset indices have been used since the late 1990s to measure wealth in developing countries. We extend the standard methodology for estimating asset indices using principal component analysis in two ways: by introducing constraints that force the indices to have increasing value as the number of assets owned increases, and by estimating sparse indices with a few key assets. This is achieved by combining categorical and sparse principal component analysis. We also apply this methodology to the estimation of per capita level asset indices. Using household survey data from northwest Vietnam and northeast Laos, we show that the resulting asset indices improve the prediction and ranking of income both at household and per capita level.

AB - Asset indices have been used since the late 1990s to measure wealth in developing countries. We extend the standard methodology for estimating asset indices using principal component analysis in two ways: by introducing constraints that force the indices to have increasing value as the number of assets owned increases, and by estimating sparse indices with a few key assets. This is achieved by combining categorical and sparse principal component analysis. We also apply this methodology to the estimation of per capita level asset indices. Using household survey data from northwest Vietnam and northeast Laos, we show that the resulting asset indices improve the prediction and ranking of income both at household and per capita level.

UR - http://www.scopus.com/inward/record.url?scp=85056351496&partnerID=8YFLogxK

U2 - 10.1111/rode.12568

DO - 10.1111/rode.12568

M3 - Article

AN - SCOPUS:85056351496

SN - 1363-6669

VL - 23

SP - 640

EP - 662

JO - Review of Development Economics

JF - Review of Development Economics

IS - 2

ER -