The asset debates: How (not) to use asset indices to measure well-being and the middle class in Africa: Table 1

Abstract

Asset indices are ubiquitous in the debate about wellbeing in African countries, not least because of the paucity of traditional household income and expenditure data. Indeed, asset data have fuelled the creation of a new, more optimistic picture of wellbeing in Africa, where both income and the middle class are growing fast. This is the first review of the use of asset indices for African countries. Readers are guided through key debates over the use of asset data, including the use of assets to measure trends over time as well as socioeconomic status and class. We argue that the theoretical and empirical advantages of the asset index over traditional welfare measures are clear, but that caution is needed. Most asset indices show significant improvements in private wealth and social welfare in African countries due to increases in the number of household assets and improvements in health and education. However, we argue that simplistic conclusions in the economics literature about the growth of income or of a 'middle class' using asset indices are poorly founded. THE 2012/13 DEBATE ABOUT AFRICA'S 'GROWTH MIRACLE' between Alwyn Young and Kenneth Harttgen and colleagues has thrust the asset index into the limelight. 1 Before that, asset indices had been slowly creeping into the development debate for African countries since the 1990s, used as proxies for various kinds of wellbeing: household income, wealth, socioeconomic status and welfare. The reasons for this popularity include a number of apparent advantages over

Approaches and Alternatives to the Wealth Index to Measure Socioeconomic Status Using Survey Data: A Critical Interpretive Synthesis

“…A heated debate over whether an African growth "miracle" occurred in the 1990s was sparked due to comparisons of well-being based on asset indices, which had grown considerably, with well-being based on national accounts, which had not. Further analysis of this mystery revealed that factors such as new cheap imports of household durables from Asia and the tendency of household asset prices to drop over time were driving this discrepancy, but to this day there are many dissenting opinions and uncertainty over whether welfare has truly improved (Johnston and Abreu 2016).…”

“…The mechanism for this urban divide can largely be attributed to a combination of rural households having fewer assets, more commonly owned assets, and agricultural assets often being assigned negative factor loadings. As one illustrative example, there is a village in Guinea-Bissau where (unlike the rest of the country) portable gas stoves are highly desired, and therefore behave as a normal good, 5 but because that village is relatively poor compared to other villages, the wealth index scoring of gas stoves is negative (Johnston and Abreu 2016). Similarly, owning a common asset will usually imply a negative scoring, which could perversely rank a household as poorer than one lacking the asset at all (Wittenberg and Leibbrandt 2017).…”

The multiple meanings of prosperity and poverty: a cross-site comparison from Tanzania

“…Our data come from a variety of social, economic and environmental settings, all of them rural, but all primarily agricultural (not pastoral or fishing communities). We undertook this work in order to explore the recommendations made by Johnston and Abreu (2016) as to the geographical limits of asset indices and the need for asset indices that reflected local understandings of wealth.…”

“…That research has aroused some controversy (Harttgen, Klasen, and Vollmer 2013, and see our discussion of this in paper Brockington et al 2018). But, for the purposes of the present discussion, the most important criticism is that made by Johnston and Abreu (2016). They observe asset indices are built on a core assumption (not empirically derived observation) that assets correlate with wealth.…”

“…Specifically, few studies have tried to explore how local meanings and definitions of wealth can vary within particular countries. This is explicitly recognised in the literature and there are recently published calls to examine how the meaning of wealth and poverty can vary at the national scale (Johnston and Abreu 2016). This paper addresses that call.…”