Measuring Children’s Economic Well-Being in Four Developing Countries: Implications for Inequality in Health and Education

Laura B. Nolan, Princeton University

There are many ways to proxy for permanent income, or the perception of earnings capacity, to empirically characterize economic wellbeing. Consumption expenditure and the wealth index are two of the most commonly used household-level economic indicators in developing countries. This paper compares these two characterizations using the Young Lives survey of child poverty from Ethiopia, India, Peru, and Vietnam. I find that the correlation of household rankings produced by the two measures is moderate but highly stable over time, as are the weights assigned to consumer durables in two of the four countries using a principal components analysis. Logistic regression models with child fixed effects (controlling for time-invariant characteristics) predicting stunting and school-going suggest that the more limited variability of the wealth index may reduce its predictive capability. Better understanding differences between these and other measures of socioeconomic status is important for appropriately characterizing economic inequalities in child wellbeing.