In most of the developing countries income is considered as a yardstick to measure poverty. From the recent past poverty is being understood as a multidimensional phenomenon; inadequate fulfillment of basic needs, such as food, clothing, education, health, shelter and social participation. Development economists have increasingly advocated using assets to complement income and consumption-based measures of welfare. The present study is conducted to pay attention on multidimensional approaches for measuring poverty and evaluation of socio economic status (SES) at household level. The objective of this study is to contribute to the debate about the measurements of assets. The study explores the ways discrete data can be incorporated into principal component analysis (PCA). The concept of polychoric PCA is used with appropriate references to the existing literature demonstrating its statistical properties. The study is based on primary data collected from a village of Nator district of Bangladesh.

In the study, household specific poverty score based on multidimensional factors, asset score has been calculated selecting 14 household items and PCA has been performed to construct asset index. It is found from the study that the score of the all scales gradually decreases with an increase in the socioeconomic status defined by ownership of assets. Analysis shows that motorcycle, wardrobe and television are the three asset variables that played most important role in socio economic evaluation. According to the SES evaluation by asset index, it is noted that 3% of the households were in the well-off category, 40.5 % in the poor and 13.5% in the very poor category. From the point of view of the absolute level of poverty it is found that the highest percentages of poor are in terms of the non-fulfillment of basic needs Health and Clothing.

Ordinal and polychoric PCA has been used to assign weight in SES index with four different categories (physical, financial, human and social capital) of asset index. It has been proved from our study; when data is ordinal polychoric PCA gives a better picture for socio economic evaluation. As the positive polychoric PCA coefficient decreases it indicates that those asset variables become less indicative of wealth. Using polychoric PCA it is found that a household having straw or polythene roof material and housing structure “cottage” is extremely likely to fall into the lowest categories of the other types of assets: electricity, number of rooms and sanitation facility. According to the SES evaluation by index category housing, it is noted that 10.5% of the households were in the well-off category, 17.0 % of the household were poor and only 5.00% in the very poor category. Polychoric PCA can also assign weights to owning and not owning an asset. Analysis shows that for household items “not owning a chair/table and gold jewelry” and for productive items “owning a kodal” are the three asset variables for which a household is extremely likely to fall into the lowest categories of other asset variables. Owning power-tiler is a sign of wealth. Analysis also shows that a household head whose level of education is illiterate is extremely likely to fall into the lowest categories of the occupational status. A household head whose level of education is doctor and engineer is extremely likely to fall into the highest category of the occupational status. For the asset index category social capital, the variable participation in social activities with lowest category ‘not active at all’ is the best indicator of lack of social capital.

It was also intended to determine the budget sharing of consumption and expenditure in different SES categories. It is found that the food item Rice and non food item Cloths, Footwear, Personal care makes up the highest percentage of the total budget share for all categories of households. For the category “very poor”, “poor”, “not so well off” households other food items which take a larger share in the budgets include potato, flour, soya bin oil, pulses, fish and any kind of tobacco products. For the category “not so well off”, “moderately well off”, “well off”; non food items educational cost, transport and medical care take a larger share in the budgets. Medical care got 2nd rank in total budget share in ‘poor’ and ‘very poor’ categories of households. From food items Meat and non food items Household construction and repairs, furniture and entertainment got no rank in the ‘very poor’ category of household.