data from different countries. While all countries collect household data to measure poverty, there are differences in the methodology and the content included in the survey questionnaire, which contributes to the ‘total error’ of the subsequent international poverty rate obtained for each country. For example, the list of goods included in the surveys is not consistent. Additionally, the steps in the methodology used to construct the consumption aggregate vary from country to country, which then adds to the ‘total error’ of the point estimates of the international extreme poverty rate.

We examine the following three aspects of the construction of consumption aggregates to see how each of them contributes to total error: (i) sampling and survey design, (ii) spatial deflation and inter-temporal deflation; and (iii) construction of the nominal consumption aggregate. The core of the paper compares poverty rates using the national consumption aggregates, which currently form the basis for poverty measurement, to standardized consumption aggregates that attempts to adjust for differences in three aspects described above. This exercise provides an assessment of the extent to which the international poverty rates depend on methodological differences in the construction of welfare aggregates across countries.

<mark>The remaining of this paper is organized as follows. Section 2 lists the data sources and the international poverty rates for the eight South Asian countries. Section 3 explains the differences in the sampling and survey design across the surveys used to estimate poverty in these countries. Section 4 analyzes how spatial deflation accounts for cost-of-living differences and inter-temporal deflation affects international poverty estimates. Section 5 assesses the differences to estimate a national consumption aggregate across countries. Section 6 examines the extent to which the international poverty rates in each country are correlated with other non-monetary dimensions of well-being. Section 7 concludes the paper.</mark>

# **<mark>2. Data and poverty rates</mark>**

National and international poverty rates are estimated using nationally representative householdlevel surveys that collect detailed food and non-food consumption data. Table 2 shows the household surveys that are used by the eight countries in South Asia to estimate poverty rates.

**<u>Table 2. South Asian household-level surveys used to estimate poverty</u>**

|**Country**|**Survey**|**Year**|
|---|---|---|
|Afghanistan|Living Conditions Survey (ALCS)|2012|
|Bangladesh|Household Income and Expenditure Survey (HIES)<sup>6</sup>|2010|
|Bhutan|Living Standards Survey (LSS)<br>|2012|
|India|National Sample Survey 68<sup>th</sup>Round (NSS)|2011|
|Maldives|Household Income and Expenditure Survey (HIES)<sup>7</sup>|2009/2010|
|Nepal|Living Standards Survey (LSS)|2010|
|Pakistan|Pakistan Social and Living Standards Measurement (PSLM)|2011|
|Sri Lanka|Household Income and Expenditure Survey (HIES)|2012|

Source: South Asia Harmonized Micro Dataset (SARMD).

Living standards vary considerably among countries in South Asia. Table 3 lists the international extreme poverty rates of each South Asian country, along with their GNI per capita, and number of extreme poor. The international extreme poverty rate of each country has been determined by

> 6 Bangladesh conducted the latest round of the HIES in 2016/17.

> 7 Maldives conducted the latest round of the HIES in 2016, but the data are not yet available as of October 2018.

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