Estimating Wealth Effects without Expenditure Data--or Tears: An Application to Educational Enrollments in States of India. Policy Research Working Papers No. 1994.

The relationship between household wealth and educational enrollment of children can be estimated without expenditure data. A method for doing this uses an index based on household asset ownership indicators. To estimate the relationship between household wealth in India and the probability that a child aged 6-14 would be enrolled in school, data were drawn from the National Family Health Survey. However, this survey measured neither household income nor consumption expenditures. As a proxy for long-run household wealth, a linear "asset index" was constructed from asset indicators in the survey, using principal components analysis to derive the weights. The analysis used rural-only data or controlled for rural-urban differences in infrastructure that might bias rural household assets. The asset index is robust, produces internally coherent results, and closely corresponds with state domestic products and poverty rates. It was validated using data on consumption spending and asset ownership from Indonesia, Nepal, and Pakistan. The asset index has reasonable coherence with consumption expenditures and works as well as, or better than, traditional expenditure-based measures in predicting enrollment status. On average, a child from a wealthy household (top 20 percent of the asset index) was 31 percent more likely to be enrolled in school than a child from a poor household (bottom 40 percent). Varying across states, the wealth gap was 5-43 percentage points for all areas and 4-53 points for rural areas. (Contains 15 references and 14 data tables.) (SV)