Comparison of weighted and unweighted methods of wealth indices for assessing SOCIO-ECONOMIC status
Due to some of the limitations of monetary measures, various non-monetary approaches for assessing household wealth have been developed as alternative tools for classifying household socio-economic status. Among them, wealth indices based on household durable assets are being used. The literature re...
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| Format: | Article |
| Language: | English |
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Elsevier
2021-02-01
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| Series: | Heliyon |
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| Online Access: | http://www.sciencedirect.com/science/article/pii/S2405844021002681 |
| _version_ | 1818725995224498176 |
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| author | Muhammad Tareq Assim Ibrahim Abdel-Razzaq Md Arafat Rahman Tonmoy Choudhury |
| author_facet | Muhammad Tareq Assim Ibrahim Abdel-Razzaq Md Arafat Rahman Tonmoy Choudhury |
| author_sort | Muhammad Tareq |
| collection | DOAJ |
| description | Due to some of the limitations of monetary measures, various non-monetary approaches for assessing household wealth have been developed as alternative tools for classifying household socio-economic status. Among them, wealth indices based on household durable assets are being used. The literature revealed that two basic methods of constructing wealth indices are employed: an unweighted method, where assets are weighted equally; and a weighted method, where specific weights are assigned to assets. In the case of using the weighted method, weighting can be assigned using various techniques. The overall objective of the study is to compare the wealth indices constructed by using weighted and unweighted methods for assessing the socio-economic status of households in rural Bangladesh. Firstly, the study attempts to construct wealth indices based on durable assets using the unweighted method and two techniques of the weighted method: weighted index using the inverse of proportion, and weighted index using principal component analysis (PCA). Following this, the study compares some distributional characteristics of these indices as well as monetary indicators. At the same time, the study evaluates and examines some attractive properties of these indices such as the extent of clumping and truncation, consistency with traditional monetary measures. Comparative analysis revealed that the unweighted asset index, as well as weighted asset index using PCA, can be treated as an efficient alternative to the monetary measures to evaluate the living standard of the households in the present study. However, due to some advantage's asset index using PCA can be considered to be somewhat better than the unweighted index. But, as the unweighted asset index is not very different from the weighted asset index using PCA, it can also be used as an alternative to the monetary measures without the need to use weighting. |
| first_indexed | 2024-12-17T21:51:10Z |
| format | Article |
| id | doaj.art-422698ae11b04a26b368ae654fc7a52b |
| institution | Directory Open Access Journal |
| issn | 2405-8440 |
| language | English |
| last_indexed | 2024-12-17T21:51:10Z |
| publishDate | 2021-02-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Heliyon |
| spelling | doaj.art-422698ae11b04a26b368ae654fc7a52b2022-12-21T21:31:18ZengElsevierHeliyon2405-84402021-02-0172e06163Comparison of weighted and unweighted methods of wealth indices for assessing SOCIO-ECONOMIC statusMuhammad Tareq0Assim Ibrahim Abdel-Razzaq1Md Arafat Rahman2Tonmoy Choudhury3Department of Statistics, Jagannath University, Dhaka, BangladeshAccounting & Finance, Prince Mohammad Bin Fahd University, Saudi Arabia; Corresponding author.Macquarie Business School, Macquarie University, New South Wales, AustraliaSchool of Business and Law, Edith Cowan University, AustraliaDue to some of the limitations of monetary measures, various non-monetary approaches for assessing household wealth have been developed as alternative tools for classifying household socio-economic status. Among them, wealth indices based on household durable assets are being used. The literature revealed that two basic methods of constructing wealth indices are employed: an unweighted method, where assets are weighted equally; and a weighted method, where specific weights are assigned to assets. In the case of using the weighted method, weighting can be assigned using various techniques. The overall objective of the study is to compare the wealth indices constructed by using weighted and unweighted methods for assessing the socio-economic status of households in rural Bangladesh. Firstly, the study attempts to construct wealth indices based on durable assets using the unweighted method and two techniques of the weighted method: weighted index using the inverse of proportion, and weighted index using principal component analysis (PCA). Following this, the study compares some distributional characteristics of these indices as well as monetary indicators. At the same time, the study evaluates and examines some attractive properties of these indices such as the extent of clumping and truncation, consistency with traditional monetary measures. Comparative analysis revealed that the unweighted asset index, as well as weighted asset index using PCA, can be treated as an efficient alternative to the monetary measures to evaluate the living standard of the households in the present study. However, due to some advantage's asset index using PCA can be considered to be somewhat better than the unweighted index. But, as the unweighted asset index is not very different from the weighted asset index using PCA, it can also be used as an alternative to the monetary measures without the need to use weighting.http://www.sciencedirect.com/science/article/pii/S2405844021002681Principal component analysis (PCA)Asset indexSocio-economic position |
| spellingShingle | Muhammad Tareq Assim Ibrahim Abdel-Razzaq Md Arafat Rahman Tonmoy Choudhury Comparison of weighted and unweighted methods of wealth indices for assessing SOCIO-ECONOMIC status Heliyon Principal component analysis (PCA) Asset index Socio-economic position |
| title | Comparison of weighted and unweighted methods of wealth indices for assessing SOCIO-ECONOMIC status |
| title_full | Comparison of weighted and unweighted methods of wealth indices for assessing SOCIO-ECONOMIC status |
| title_fullStr | Comparison of weighted and unweighted methods of wealth indices for assessing SOCIO-ECONOMIC status |
| title_full_unstemmed | Comparison of weighted and unweighted methods of wealth indices for assessing SOCIO-ECONOMIC status |
| title_short | Comparison of weighted and unweighted methods of wealth indices for assessing SOCIO-ECONOMIC status |
| title_sort | comparison of weighted and unweighted methods of wealth indices for assessing socio economic status |
| topic | Principal component analysis (PCA) Asset index Socio-economic position |
| url | http://www.sciencedirect.com/science/article/pii/S2405844021002681 |
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