# **II.   DATA CONSTRUCTION**

The analysis focuses throughout on the developing countries in East Asia and the Pacific (EAP, or “East Asia” for brevity), as defined by the World Bank.<sup>4</sup> The starting point of our data set is a set of harmonized household survey data by the World Bank, which we supplement with additional data from PovcalNet.<sup>5</sup> In total, we use 60 surveys, with 31 surveys directly from the microdata and the remainder from PovcalNet. Because most countries do not conduct annual surveys, we match these surveys to a number of benchmark years – 1988, 1992, 1997, 2002, 2007, and 2012.<sup>6</sup> Due to limited availability of microdata, all information for the first two benchmark years is entirely based on PovcalNet. For China, no microdata are available, so all data come from PovcalNet.

Our database includes around 10 surveys per benchmark year out of a total of 19 EAP countries, and 92% of the surveys are consumption surveys (Table 1).<sup>7</sup> Given our interest in estimating the EAP distribution of consumption expenditure, it is of course important that the surveys included in our database cover as much of the region as possible. On average, we cover about 98% of regional GDP, and at 97% a slightly lower share of the regional population (Table 1).<sup>8</sup> While we have a good coverage of EAP as a whole, our coverage of Pacific countries is relatively low and unstable.<sup>9</sup> The Appendix includes a robustness check using only those countries that are available in all benchmark years.

Each national distribution is approximated by the average consumption of the 100 percentile groups. For the microdata, percentile groups are computed directly from the household survey. PovcalNet also reports percentile groups whenever it has access to micro data. However, in some cases it only has access to grouped data, such as 10 or 20 coordinates of the Lorenz curve. The reliance on grouped data has diminished over time, but for some countries, such as China, 4 That is, our analysis includes Cambodia, China, Fiji, Indonesia, Kiribati, Lao PDR, Malaysia, Marshall Islands, Myanmar, Micronesia, Mongolia, Palau, Papua New Guinea, the Philippines, American Samoa, Solomon Island, Thailand, Timor-Leste, Tonga, Tuvalu, Vanuatu, and Vietnam. High-income countries in the region, such as Japan; the Republic of Korea; or Taiwan, China, are not included in the analysis (see p. 49 of World Bank (2016) for the full list of high-income countries).

5 Harmonized household survey data: EAPPOV created by the World Bank’s EAP Team for Statistical Development, accessed on 18 January 2016. PovcalNet: online tool developed by the World Bank’s research department, <u>http://iresearch.worldbank.org/PovcalNet/, accessed on 25 November 2016.</u> 6 Similar to Lakner and Milanovic (2016), surveys need to be within two years of a benchmark year, and surveys in consecutive benchmark years must be at least three and no more than seven years apart from each other. Because of poor availability of surveys in earlier years, we cannot start before 1988.

7 Throughout the analysis, income surveys are used for Malaysia, while all other countries use consumption. Similar to Lakner and Milanovic (2016), we mix income and consumption surveys across countries and make no adjustment. While we are fully aware of the important differences between the two concepts, income and consumption surveys cannot reliably be inferred from one another (Anand and Segal, 2015). Also, in an abuse of terminology, we refer to income and consumption interchangeably in this paper.

8 We use the World Bank’s income groups from 1 July 2015. Countries are classified according to their GNI per capita in 2014 using exchange rates based on the Atlas method.

9 There are no surveys available for Pacific countries prior to 1997, and the coverage for 2012 is particularly low. Between 1997 and 2007, on average, our surveys cover about 60% of both the population and the total GDP of Pacific countries.

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