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Poverty DynamicsInterdisciplinary Perspectives$
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Tony Addison, David Hulme, and Ravi Kanbur

Print publication date: 2009

Print ISBN-13: 9780199557547

Published to Oxford Scholarship Online: May 2009

DOI: 10.1093/acprof:oso/9780199557547.001.0001

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The Construction of an Asset Index

The Construction of an Asset Index

Measuring Asset Accumulation in Ecuador

(p.102) 5 The Construction of an Asset Index
Poverty Dynamics

Caroline Moser

Andrew Felton

Oxford University Press

This chapter applies principal components analysis to panel data from urban Ecuador (collected over 1978-2004) and constructs an asset index to measure asset accumulation. The chosen assets are: physical capital (including housing); financial/productive capital; human capital and social capital (natural capital is not included as this is an urban study). It is shown that grouping a large number of assets into a smaller number of dimensions facilitates an intermediate level of analysis. By examining how households allocate their resources using an asset index, the analysis of specific poverty mechanics is possible without examining an overwhelming quantity of individual variables. Asset indices are an important complement to pure income data because they paint a clearer picture of the strategies households in various income groups have employed to acquire different types of assets, and because they provide clues to poverty alleviation.

Keywords:   consumption, developing countries, assets, households, resource allocation, poverty assessment, asset indices

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