Constructing an asset index for the Philippines through the principal components analysis approach

• Main Authors: Capili, Diane Dominique, Cuenca, Jennianne, Joaquin, Patricia Melissa, Tengco, Ma. Rina Sheena
• Format: text
• Language: English
• Published: Animo Repository 2005
• Subjects: Poverty; Household surveys; Index numbers (Economics); Economics
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/14341
• Institution: De La Salle University

Poverty is one subject in Economics that seems simple yet it is not. It is one of the most pressing issues yet not that looked into. In this paper, we present an alternative way of measuring poverty, deviating from the conventional ways of measuring poverty-expenditure and income. This is due to the fact the income data may not be available at all times and that income data may be subject to reporting errors since it is usually through memory recall that these data may be subject to reporting errors since it is usually through memory recall that these data are collected. This pushed the researchers to look into another way of measuring poverty. The proponents quantified poverty in terms of the assets that a household owns--which is divided into household durables and housing characteristics. Through this, the households were classified into deciles and the results show that those households which have assets with the lowest asset scores tend to fall in the lower deciles, as opposed to those who belong to the higher deciles because they possess assets which have high asset scores. The results show that this is reflective of the well being of the households although there are certain limitations like the too general categories of assets used, and also its inability to capture current income effects. Despite these limitations, this asset index is still valuable because it can be used for the government's policy targeting strategies, although this should not be its sole basis since this measures poverty in relative rather than in absolute terms. This can be used as a primary step by the government in its policy targeting strategies by using this to pinpoint the areas which really need intervention, and after that, they can focus their resources in that area, thereby enabling them to save their resources instead of trying to solve everything at the same time. This way, they can be more cost effective and their policy is already focused.