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Health Policy and Planning Advance Access published online on October 9, 2006
Health Policy and Planning, doi:10.1093/heapol/czl029
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© The Author 2006. Published by Oxford University Press in association with The London School of Hygiene and Tropical Medicine. All rights reserved.

How to do (or not to do) ...

Constructing socio-economic status indices: how to use principal components analysis

Seema Vyas 1 * and Lilani Kumaranayake 1

1 HIVTools Research Group, Health Policy Unit, Department of Public Health and Policy, London School of Hygiene and Tropical Medicine, London, UK

* To whom correspondence should be addressed.
Seema Vyas, E-mail: seema.vyas{at}lshtm.ac.uk


  Abstract

Theoretically, measures of household wealth can be reflected by income, consumption or expenditure information. However, the collection of accurate income and consumption data requires extensive resources for household surveys. Given the increasingly routine application of principal components analysis (PCA) using asset data in creating socio-economic status (SES) indices, we review how PCA-based indices are constructed, how they can be used, and their validity and limitations. Specifically, issues related to choice of variables, data preparation and problems such as data clustering are addressed. Interpretation of results and methods of classifying households into SES groups are also discussed. PCA has been validated as a method to describe SES differentiation within a population. Issues related to the underlying data will affect PCA and this should be considered when generating and interpreting results.

Keywords: socio-economic status; principal components analysis; cluster analysis; methodology.
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