Constructing Indicators of Community Living Standards for Poverty Analysis in Sulawesi, Indonesia : A Factor Analysis Based on Statistics "Potensi Desa"

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This paper is concerned with the derivation of living standard indicators for the community using secondary village based data set. It examines several of the steps mainly using factor analysis as well as z-score transformation for index construction, and highlights some of the critical points, which should guide the analysis. Factor analysis is particularly useful in coping with huge data set; awesome number of variables, mean while z-score transformation and additive summation index construction allows us to formulate the indicators. Validation test shows very strong correlation coefficients between constructed indices and the associate factor scores, thus this more practical method is sufficiently reliable for analyses. Some critical points are identified in dealing with this kind of secondary data, such as missing data and inconsistencies of original data coding, as well as the existing of negative association of the member variables of the index. Finally, there are five mostimportant indicators for the community living standard in this region; they are Consumption Rate of Durable Goods and Services, Rate of Luxurious Possession, Village Prosperity, Domestic Water Sources and Decease Occurrence. These five indices provide local specific characteristic for the community living condition in Sulawesi Region and therefore very appropriate for the poverty analysis particularly for this region.
2004-03-15