and Income Survey (HEIS) that is conducted annually since 1963 in rural areas and 1968 in urban areas. Unit record data are available in an electronic format since 1984.This paper constructs the trend for the most recent 2008-2014 period. Besides the knowledge gap, this particular time period was chosen to minimize the risk of comparability between surveys due to changes in instruments and data collection process.<sup>5</sup> The paper explores different analytical approaches for constructing the components of the welfare aggregate as well as price adjustments, and conducts various robustness checks of poverty trends. This work may be helpful to inform discussions about establishing official poverty measurement methodology and necessary data requirements.

Poverty rates in this paper are measured using different international poverty lines expressed in USD at 2011 purchasing power parity (PPP). Using an international line helps to avoid arbitrariness and sensitivity of establishing a line in local currency units. In addition, selected international lines in this paper are used only for illustrative purposes.

This paper consists of seven sections. Section 2 briefly discusses main methodological issues in poverty measurement. Section 3 explains construction of different components of expenditure based welfare aggregate. Section 4 discusses the methodology for price adjustment. Section 5 presents robustness tests of expenditure based poverty and inequality measures. A brief robustness test of poverty trends by using income data is done in section 6. Section 7 concludes.

# **2. Methodological issues in poverty measurement**

Measuring poverty requires two broad steps. The first step is to define an indicator to measure welfare or living standards. The second step requires setting a poverty line - the minimum welfare level below which a person is considered to be poor.

There are two most common welfare indicators for poverty measurement: consumption and income per capita derived from survey data. The choice between them is often made based on the social-economic conditions of the country chosen for the analysis and microdata collected. Income is usually used to measure welfare in rich and developed countries. For example, poverty in most of European Union countries is measured by income, but in most of the developing world consumption is deemed a better measure for poverty as income suffers from measurement error and tends to be underreported (Azzarri et al. 2010). Consumption includes both purchased goods, services and home production and is believed to be a better candidate to measure lifetime welfare in less developed countries. Consumption can be better measured than income in countries where agriculture and self-employment are important employment options. Consumption is also less subject to seasonal volatility in rural areas compared to income and is more likely to be representative of general welfare (Coudouel, Hentschel and Wodon 2012; Haughton and Khandker 2014). Using income for poverty measurement may have its benefits as well. For example, contributions to change in income poverty can be established by income sources and this information will be very useful and easy to use for policy recommendations. Indeed, a recent paper by Meyers and Sullivan (2009) argues

> 5 One caveat is that information on changes in sample frame in the selected period was not available in open sources. In order to test the robustness of obtained trend the team re-estimated poverty without survey weights. Results are qualitatively the same and available upon request.

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