_CIh2_ . Similarly, the significance of this difference can be tested by means of the standard error of β. The relationship suggests that moving from one measure of SES to another will only result in differences in measured inequality when (i) the shift in SES measure results in a re-ranking of individuals; and (ii) the change in individual ranking (∆ _Ri_ ) is correlated with the health variable ( _hi_ ) of interest.

# **2.2 Measures of SES: Consumption and the Asset Index**

The literature on socioeconomic inequalities in health has defined the concept of socioeconomic status (SES) in very different ways. SES has often been conceived broadly as an individual or household’s position in society, where that position is determined by focal variables such as education, prestige, occupation, wealth, or some other dimensions of “social standing.”<sup>9</sup> Economists have tended to favor a more narrow conception of welfare, in particular income and consumption, both as a proxies for well-being in a broader sense, and as important enabling factors for improving nonmaterial dimensions of living standards.<sup>10</sup> However, income and consumption data are both expensive and difficult to collect. As a consequence, many otherwise useful data sources lack direct measures of living standards (e.g., the Demographic and Health Surveys). On the face of it, this precludes the analysis of socioeconomic inequalities of health, as well as testing of hypotheses relating to the impact of living standards on health and health service outcomes. Moreover, the exclusion of living standards measures in multivariate analysis raises the possibility that other coefficient estimates are rendered biased. These concerns have prompted researchers to use data on household assets and other characteristics to construct alternative measures of welfare or living standards (e.g., Filmer and Pritchett 1998; Montgomery and others 2000; Sahn and Stifel 2000).

## **_Consumption_**

The focus on consumption and income as measures of welfare are grounded in the proposition that, under certain conditions, household welfare can be represented in monetary terms ( _money-metric utility_ ), as the value of the household’s consumption bundle at a set of reference prices (Samuelson 1975). This can be approximated by adding up all expenditures of a household, and dividing by an appropriate price index (Deaton and Zaidi 2002). In many cases, there are good reasons for preferring consumption over alternative money-metric measures of welfare, such as income or expenditure. Unlike income, consumption tends to be “smoothed” over time, and is therefore more directly related to current living standards than current income, at least for short reference periods. Although many components of consumption are measured by looking at household expenditures, expenditure excludes consumption that is not based on market transactions. Moreover,

> 9 In one of the earliest uses of the term SES (U.S. Bureau of the Census 1963), it referred to a multidimensional index reflecting education, income, and occupation (Bollen, Glanville, and Stecklov 2001).

> 10 Even economists have increasingly accepted that welfare is a multidimensional phenomena, which includes not only material factors, but also the ability of individuals to enjoy basic freedoms (Sen 1985; 1999). This is an important perspective; a broader conception of living standards may drastically change the perception of who in a population is poor, and may provide a more appropriate basis for designing and targeting interventions.

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