In order to estimate poverty trends it is important to make sure that numbers are consistently measured across time (Haughton and Khandker 2014). Firstly, the sampling frame and survey instruments should not change during the period selected for the analysis. As shown in Beegle et al. (2010), changes in recall period and how consumption data are collected may result in significantly different poverty rates. Secondly, the welfare aggregate should be defined consistently across years. For example, excluding health expenditures in the first year and including them in the second will make poverty estimates between these years not comparable. Thirdly, the timing of survey work should be the same across years. This is especially important for the surveys without inter-temporal stratification within a year and with high seasonality in economic activities.

# **3. Expenditure‐based welfare aggregate and its components**

The Household Expenditure and Income Survey (HEIS) has been conducted annually by the Statistical Center of Iran (SCI) since 1963 in rural areas and 1968 in urban areas. The unit record data from 1984 onward are publicly available.<sup>6</sup> The survey is nationally representative and two-stage stratified. Strata information, however, is not publicly available for all years. Households are distributed randomly and evenly throughout the year, making one-twelfth of the sample interviewed each month. However, the month of interview information is publicly available only from 2008 onwards. Sample sizes vary over the years ranging from 5,759 households in 1986 to 39,856 households in 2014.

Gregorian notations for years are used in this report, but the actual survey period is left as it is shown in the HEIS: March to March. For example, year 2010 means the survey period between March 2010 and March 2011.

HEIS includes both demographic and income information but its main focus is on expenditures. Surveys collect expenditure information on more than 1,000 items. The recall period of expenditures for most items is the last month. For durables, some education expenses, insurance expenditures, investment in housing and farms, and income components, the recall period is the last 12 months. Like in most surveys of such type, income and expenditure data are self-reported. HEIS does not distinguish between how much is spent and how much is consumed and reports only expenditures on a particular item. For items, which were not purchased, an estimated value is provided.

The food component of the welfare aggregate includes purchases or the estimated value of all food products bought or received for free. Food expenditures in restaurants and dining facilities are also included in food. The non-food component aggregates the following groups of expenditures: tobacco, miscellaneous, hotel, leisure, communication, transport, furniture, housing, clothing, actual and estimated rent, education, and health insurance.

As discussed above, there are no clear rules on whether education and health expenditures should be included or excluded from the welfare aggregate and the decision depends mainly on the country context. Following Deaton and Zaidi (2012), the elasticity of education and health expenditures with respect to total expenditure per capita has been estimated to determine whether education and health expenditures are closely associated with wellbeing. The point is to keep expenditures with high elasticities to total expenditures. As is often observed in other countries, elasticity of education expenditures is higher than

> 6 Data points were downloaded in January 2016.

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