Measuring Multidimensional Rural Poverty using Combination of Methods – A Case Study from Southern Ethiopia

Abstract

This paper focuses on the development and empirical application of a multidimensional measure of wellbeing index which can be used to assess level of poverty among households in rural areas of developing countries. The study employed community-based participatory and questionnaire-based household survey data collection methods. The final multidimensional index was derived using a Principal Components Analysis (PCA) on household survey data set collected from 358 rural households in Southern Ethiopia. Data on 16 variables measuring multiple aspects of household wealth status were used to extract the set of principal components utilized in the construction of the index. Two key statistical tests, the KMO and Bartlett’s tests, showed the appropriateness of the data for PCA. Results revealed that four major factors influence the wealth status and hence the wellbeing of households: household natural resource endowment, assets endowment, human capital and access to institutional support and proxy to physical market. Therefore, we suggest that any efforts to improve the wellbeing of farm households in the study area as well as in other regions with similar socio-economic and biophysical settings should consider these factors as entry point to poverty alleviation.

Keywords: Multidimensional wellbeing; Principal components analysis; wealth index; Farm households; Halaba