CONSTRUCTING SOCIO-ECONOMIC STRATA IN PARAGUAY: IMPLEMENTATION WITH PRINCIPAL COMPONENTS ANALYSIS IN R

This paper presents the application of Principal Component Analysis (PCA) technique in the construction of socio-economic indexes. Commonly, household welfare measures are constructed considering the information on income, consumptions or expenditure. However, the details on these variables are problematic and the use of indicators on assets of households is an option on the measurement of inequality. We present the uses and limitation of socioeconomic indexes. It specifically addressed issues related to the choice of variables and data preparation.