Household composition and the measurement of disparity in levels of living

This study is intended to bring out the importance of household composition in the analysis of inequality measurement based on household survey data. Equivalent adult scale approach is used to adjust the distribution of household consumption expenditure (HCE) for household size and composition effects. The exercise based on the National Sample Survey data (25th round) for rural Punjab reveals that the ranking of households by per equivalent adult consumption expenditure (PEAE) differs significantly from the ranking by per capita consumption expenditure (PCE). Many households classified as poor according to the criterion of PCE are not so classified by the criterion of PEAE. The exercise also reveals that the distribution of HCE, if not adjusted for household size and composition effects, gives biased measures of the extent of true inequality. The bias may be in either direction.