Development of a temporally harmonized asset index: evidence from across 50 years of follow up of a birth cohort in Guatemala.

ABSTRACT

BACKGROUND: Asset-based indices are widely-used proxy measures of wealth in low and middle-income countries (LMIC). The stability of these indices within households over time is not known. METHODS: We develop a harmonized household asset index using Principal Component Analysis for the participants (n = 2392) of INCAP Longitudinal Study, Guatemala using data from six waves of follow-up over the period of 1965-2018. We estimate its cross-sectional association with parental schooling (in 1967-75) and attained schooling (in 2015-18) of cohort members. We study how patterns of cross-sectional loadings change over time and between urban-rural settings. We assess its robustness to omission of assets or study waves and alternate specifications of factor extraction procedure (exploratory factor analysis, multiple correspondence analysis). RESULTS: The harmonized index constructed using 8 assets and 11 housing characteristics explained 32.4% of the variance. Most households increased in absolute wealth over time with median wealth (25th percentile, 75th percentile; households) increasing from - 3.74 (- 4.42, - 3.07; 547) in 1967 to 2.08 (1.41, 2.67; 1145) in 2017-18. Ownership of television, electricity, quality of flooring and sanitary installation explained the largest proportion of variance. The index is positively associated with measures of schooling (maternal r = 0.16; paternal r = 0.10; attained r = 0.35, all p < 0.001). In 2015-18, house ownership versus housing characteristics and ownership of electronic goods differentiate households in urban and rural areas respectively. The index is robust for omission of assets or study waves, indicator categorization and factor extraction method. CONCLUSION: A temporally harmonized asset index constructed from consistently administered surveys in a cohort setting over time may allow study of associations of life-course social mobility with human capital outcomes in LMIC contexts. The approach permits exploration of trends in household wealth of the sample over a follow-up period against repeated cross-sectional surveys which permit the estimation of only the mean trajectory.