Working Paper 3. Constructing the Poverty Profile: An Illustration of the Importance of Allowing for Household Size and Composition in the Case of Vietnam

Abstract

The calculation of income-poverty profiles should allow for household size and composition, but rarely does so. Failure to do so means that the poverty profile will be distorted. The appropriate adjustments are straightforward, requiring simple assumptions which, whilst arbitrary, are better than ignoring the problem. Not making these adjustments not only distorts the relationship between household size and poverty, but all aspects of the poverty profile correlated to household size. We show that in the case of Vietnam if the adjustments are not made, rural poverty is under-stated as is poverty amongst those with little education, minority ethnic groups and female-headed households. Relatively far fewer children live in poverty than is suggested when the appropriate data adjustments are not made