The Wealth Index (most commonly referred to as the DHS Wealth Index) is a widely used composite measure in social sciences, public health, and development research. It serves as a proxy for a household’s cumulative living standard or socioeconomic position, particularly in low- and middle-income countries where direct income or consumption data can be unreliable or hard to collect.
It was developed by The DHS Program (Demographic and Health Surveys), a major source of nationally representative household survey data on population, health, and nutrition. The index helps analyze how wealth relates to health outcomes, access to services, education, and inequalities (e.g., comparing vaccination rates or child nutrition across wealth groups).
How the Wealth Index Is Measured
The standard approach (used in DHS surveys) relies on easily observable and collectible household data rather than income. It includes:
- Ownership of durable assets — Examples include televisions, refrigerators, bicycles, motorcycles, cars, radios, phones, or other goods.
- Housing characteristics — Wall, floor, and roof materials (e.g., mud vs. brick walls, dirt vs. concrete floors).
- Access to utilities and services — Type of water source (piped, well, etc.), sanitation facilities (flush toilet vs. pit latrine vs. open defecation), electricity access, and fuel for cooking.
These variables are binary (yes/no ownership) or categorical, making them straightforward to collect via surveys.
The index is constructed using Principal Components Analysis (PCA), a statistical technique that:
- Identifies the variables that best explain variation in the data.
- Assigns weights to each variable based on how strongly it correlates with overall “wealth.”
- Combines them into a single continuous score for each household.
This produces a relative scale (households are ranked against others in the same survey/population). The raw scores have no absolute meaning on their own.
Households are then divided into five wealth quintiles (each representing ~20% of the population):
- Lowest (poorest 20%)
- Second
- Middle
- Fourth
- Highest (wealthiest 20%)
This allows comparisons, such as health disparities between the poorest and richest groups.
Key Characteristics
- It’s a relative measure within a specific country/survey (or sometimes urban/rural areas separately), not an absolute measure of income or dollars.
- It proxies long-term wealth/stock of resources better than short-term income fluctuations.
- It’s not perfect (e.g., it may undervalue rural vs. urban differences or miss some nuances), but it’s reliable, cost-effective, and correlates well with many health and development outcomes.
Variations and Extensions
Other versions exist for specific purposes:
- International Wealth Index (IWI) — A comparable version across countries and over time (scored 0–100), based on a fixed set of assets and housing quality; useful for cross-national comparisons in low- and middle-income countries.
- Comparative Wealth Index (CWI), Absolute Wealth Estimate (AWE), and others — These adjust for comparability across surveys/years or provide more absolute benchmarks.
The classic DHS Wealth Index remains the most commonly referenced and used in global health and demographic research. For detailed construction per survey, check resources from The DHS Program.