How the Household’s Incomes on Dollar Street are calculated

(The summary below is intended to quickly understand how the houses were positioned on Dollar Street. The detailed documentation is here.)

General accuracy note

We recommend taking all income numbers on Dollar Street with a grain of salt. In most cases it’s reasonable to assume the income of the family might just as well be 25% higher or lower. On lower income, you should assume the estimate are even less accurate as economic transactions in poorer settings are generally less formalised.

Prices and currencies

The household incomes per person determines where we position a house on Dollar Street. But the income estimate is not perfectly for any of the houses. Estimating a family’s income is difficult even within the same currency area. Most people have a hard time recalling all their economic transactions and resources in a quick interview and cost of living varies a lot within cities and countries. Those challenges exist when comparing incomes within the same country. But the houses on Dollar Street come from different countries, and there the challenges are even larger. The cross country comparisons of incomes are adjusted for rough estimates of the different purchasing powers (PPP) of different currencies, from the International Comparison Program (ICP) managed by the World Bank. These estimates of purchasing power parity are adjusted as the values of countries currencies and inflation change over time. The most up to date estimates are form 2011, which is what we use for Dollar Street.

Collecting income data

The incomes on Dollar Street are reported by the family to the photographer, and then in some cases, where they seem wrong, adjusted by Gapminder based on assets seen on the photos, e.g. a family with a car is not allowed to show up on an income below $240 dollars per month. Bt the proper way to record a families economic level would be to ask detailed questions about their consumption which require interview skills for making sure the family report all kinds of resources, etc. When the World Bank conduct their Living Standards Measurement Surveys (LSMS), they don’t just send out a photographer to a family.

Per capita

Needs for housing space, electricity, etc. will not be three times as high for a household with three members than for a single person. Therefor we don’t simply divide the households total income by the total number of household members. We use something called a equivalence scalesA wide range of equivalence scales exist, and we use the method called OECD-modified scale: The calculation is simple. We assigns a value of 1 to the household head, of 0.5 to each additional adult member and of 0.3 to each child. So for example, in a family of two adults and one child, instead of dividing their total income by 3, we divide it by 1.8 which is = 1 + 0.5 + 0.3.