Consumption expenditure has long been the preferred measure of welfare in the LSMS surveys and was the focus of substantial attention in the Developing Household Survey Questionnaires Book (see Deaton and Grosh, 2000). This measure provides a critical underpinning to much of the analysis of living standards that LSMS surveys support. A consumption measure will exhibit a number of qualities - the specific quality of primary importance will vary depending on the specific purpose of the welfare analysis at hand.
Accurate - as good an approximation of true consumption as possible
Precise - reflects as closely as possible any differences within sub-populations
Consistent - able to track welfare over time or compare outcomes in different settings
Consumption in Tanzania. The LSMS Team in collaboration with the University of Dar es Salaam and Economic Development Initiatives (EDI) has developed a consumption experiment to look at the effects of the method of data capture (diary versus recall), the level of respondent (individual versus household), the length of the reference period for which consumption is reported (varying from 3 days to one week to one year) and the degree of commodity detail in recall surveys (varying from less than 20 to over 400 items) on the measurement of household consumption and poverty.
The Survey of Household Welfare and Labour in Tanzania (SHWALITA) is being used to conduct the consumption experiment along with experiments with employment modules and subjective welfare modules.
Methods of household consumption measurement through surveys : experimental results from Tanzania. Policy Research Working Paper 5501, December 2010.
What Does Variation in Survey Design Reveal about the Nature of Measurement Errors in Household Consumption? Policy Research Working Paper 6372, February 2013.