HANDBOOK ON RURAL HOUSEHOLD, LIVELIHOOD AND WELL-BEING: 1

VII APPROACHES IN SELECTING A CORE SET OF

INDICATORS
VII.1 Introduction
In Chapters III-V, and in associated annexes, numerous examples of rural and
rural development indicators, as defined by international organizations as well as by
national agencies, were presented.

The selection of a particular set of indicators is based on

 which definition of rural is actually chosen, which in turn is dependent on the

specific policy issue under consideration, and
 data availability.

It is therefore not meaningful to present a recommended set of indicators as

such a set is “a moving target”. The main purpose of this chapter is rather to provide
a statistical framework to aid the identification and construction of a core set of
indicators that will be useful to describe “rurality.” At the end of the chapter, a list of
suggested areas of interest is provided, with examples of indicators, based on
considerations of operational feasibility.

A large number of statistical indicators are available to measure socio-

economic phenomena. Many are put forward in publications and on web-sites by
national, international and independent institutions. Any indicator will provide
information on some characteristics of the phenomena under observation. However,
the selection of suitable indicators requires that account be taken of the correlation
among the variables under consideration and the measurability of the specific
indicators. The calculation of several highly correlated indicators is not useful either
from an analytical or an economic point of view. Second, the selection of suitable
indicators has to be done in relation to the particular focus of the present Handbook:
rurality.

“Rurality”, as discussed in this manual, is a geographic (or territorial or spatial

or an area) concept.1 Rurality refers to the distance of the household with respect to
accessing markets or services and it refers to the density of the settlement in which
the household is located (as larger settlements provide agglomeration economies that

1
It is acknowledged that for some discussions, “rural” is a social construct and thus perceptual notions
of “rural” would be appropriate for these discussions. It is also acknowledged that historically, rural
was agriculture, fishing, lumbering and mining AND these activities all used to take place in rural
areas. However, within each of these areas, there were also merchants selling various goods and people
providing services (such as teachers and tavern operators) so that not all the people in these areas were
workers in agriculture, fishing, mining and lumbering. Sometimes these workers lived in villages or
towns and at a certain size of settlement, there would be some urban services (such as a post office,
tavern and a grocery store) available. Thus, for these questions, their settlement was "urban." For
other discussions, the classification of the household according to the sector of employment of the head
of the household is important (for example, the international fluctuation of the prices of the output of
the agriculture, fishing, mining and lumbering sectors hit these households directly) but these
discussion are independent of the “rurality” (i.e. distance and density) of the location of the household.

10 August 2005
2 STATISTICS ON RURAL DEVELOPMENT AND AGRICULTURE HOUSEHOLD INCOME

allow the provision of “higher-level” services (such as brain surgery and professional
football games)).

Summary indicators (developed from a combination of individual indicators)

might also under certain circumstances be useful in order to provide an overall view
of rurality. It is important, when dealing with summary indicators, to understand their
composition and the limitations that arise from the way that they are constructed. The
issue of weighting in the construction of synthetic indicators suggests a careful
application of this kind of indicator and a requirement to make the components visible
(for more information on this specific problem, see Chapter VI).

VII.2 Two approaches in selecting indicators

In an historical perspective, agriculture and other related or non-urban

economic activities (fishing, lumbering, mining, etc.) characterise the rural world and
what are considered rural areas. In the sectorial approach, rural households are thus
defined based on their main economic activity (agriculture, forestry, mining etc.). It is
then possible to apply rural indicators to this sub-population of households and
compare them to rural households in different regions, or to non-rural households in
the same region. The sectorial approach is mainly used in developing countries where
rurality is almost exclusively identified with agriculture, forestry and fishing because
of their dominant position in economic activity.

In the territorial approach, rural areas are identified in relationship to their

spatial characteristics that describes
 (long) distances; and
 (low) population density.

The indicators can be used to compare different rural areas or to compare rural
areas to non-rural areas. Thus, according to this approach, which is mainly used in
developed countries with a low agriculture population, rural populations live at a
distance from a population centre and they live in areas with a low population density.
The economic and social implications are that rural populations have more difficulty
accessing urban markets and they have more difficulty in accessing the non-market
benefits (such as hospitals or ballet performances) of urban agglomerations. A low
population density implies that rural populations lack urban agglomeration
economies– and urban agglomeration economies are now driving economic
development in many countries.

It is recommend that the choice of geographical unit be based on the specific

policy issue under consideration. For example, in rural areas with no access to treated
water, water quality would be a very local issue and a definition of rural based on
neighbourhoods or localities would be appropriate. However, for regional issues,
such as access to jobs within a commuting shed or the access to surgical procedures,
then the choice of the definition of rural should be based on regional territorial units –
like a county or, in some countries, a regional planning authority.

10 August 2005
 HANDBOOK ON RURAL HOUSEHOLD, LIVELIHOOD AND WELL-BEING: 3

Typologies of rurality. For some policy issues, localities, neighbourhoods,

regions, counties, etc. may be rolled up to provide a typology of various types of rural
areas. This often allows a gradient from ‘most rural areas’ to ‘least rural areas’ to be
constructed (for a review, see Chapter III). Sometimes, it is important to classify
individual communities as ‘rural’ versus ‘urban’ within larger ‘predominantly rural’
and ‘predominantly urban’ regions. This is particularly important because ‘rural’
communities within a ‘predominantly urban’ region would be expected to have
different problems and different solutions than a ‘rural’ community in a
‘predominantly rural’ region.

The wide difference in levels of development in several key geographical

areas of the world suggest that, besides the core set of indicators, there is a need for
some specific focuses. Some themes are more relevant to developed countries, such
as environmental conservation and rural sustainability. Other themes are more
relevant to developing countries, such as poverty reduction and health care.

This approach is already adopted by international organisations with regard to

developing countries where the question of rural development is more closely related
to overall problems of general development. Having said that, in order to foster
comparability across different areas, these special focuses (or departures from a
common set of indicators) need to be limited.

VII.3 Rural indicators classified by themes

In Chapter III.4 details were given about themes to which indicators are
classified as proposed by the OECD, Eurostat, World Bank and FAO. By and large
these sets of themes resemble each other, which is, of course, no surprise. All four
proposed set of themes constitute good examples for countries or agencies wanting to
set up rural development indicators.

The observation of rurality can be done from several perspectives, suggested

by different theories of development. The corresponding themes of interest could be
utilized for the construction of rural indicators. Besides the four sets of themes
mentioned above, two alternative schemes are also proposed here, aspects of which
are already part of national and international statistics. In Section VII.5 examples of
indicators are given for various themes within the two schemes.

Scheme I:

A. Components of rural development

1. Natural environment
2. Social well-being
3. Conditions for economic well-being
B. Potential of rural development
1. Territory with respect to population
2. Economic structure
3. Communications

10 August 2005
4 STATISTICS ON RURAL DEVELOPMENT AND AGRICULTURE HOUSEHOLD INCOME

C. Special focuses on developing countries

Scheme II:

In this scheme the focus is on the development process. The discussion on

indicators of development starts from a framework for understanding “sustainable
livelihoods” as suggested by the Department for International Development (DFID) in
the report: Introduction to the Sustainable Livelihoods Approach.2
([Link]/info/info_guidancesheets.html)

DFID defines livelihood as the combination of “ the capabilities, assets and

activities required for a means of living”. Within this livelihood context the core
analytical framework starts from the so-called asset pentagon, which contains the
following five categories:

1. Natural capital;
2. Financial capital;
3. Human capital;
4. Physical capital; and
5. Social capital.

Communities and regions achieve desired outcomes by applying strategies to

these assets. Indicators or statistics on strategies are difficult to conceptualize and,
typically, the strategy that works for one community or region will not be appropriate
for another community or region. However, some indicators or statistics that
measure:

6. the capacity of the community / region to generate and to implement

strategies will be proposed.

Finally, indicators of

7. desired outcomes would need to be monitored.

It quickly becomes obvious that there are no hard-and-fast rules for assigning
a given indicator to a given category. Rather, the purpose of these categories is to
remind us that these five assets are important in the development process of urban and
rural communities and regions.

A list of examples of indicators relating to these two schemes appears at the

end of this chapter.

2
DIFD is a British government department responsible for promoting development and the reducing
poverty.

10 August 2005
 HANDBOOK ON RURAL HOUSEHOLD, LIVELIHOOD AND WELL-BEING: 5

VII.4 Measures of rurality

VII.4.1 Defining the characteristics of an indicator that deals with rurality

Statistical indicators have to satisfy certain properties to be useful and

effective. This is particularly true for indicators dealing with rurality. There are two
major reasons for this. First, the indicators often deal with poor areas of the world
with few resources for statistical investigation. Second, and perhaps more important,
is that rurality itself does not have a simple definition.

The first characteristic of a rural indicator is that it should use variables that
are reliable and simple to measure. This implies that the data inputs required for the
calculation are cheap to acquire and easy and straight-forward to get from a
respondent or to access from an administrative data source (for indicators such as
municipal expenditures or available hospital beds in the given rural area).

The second characteristic of a rural indicator is that it must have worldwide

feasibility of measurement and comparability. It is important to remember that from a
sustainable development perspective, measurements of rurality are only relevant in
relative terms such as:
1. a rural area compared to another rural area; or
2. a rural area compared to a non-rural area;

VII.4.2 Statistical requirements of a rural indicator

The following is a list of requirements for a good quality indicator:

1. Understandable: should be clear and brief, easy for users to read and
understand;
2. Transparent: inputs and the process of production should be clear.
Users should know how it is produced, where the information comes
from, how the information is processed and how it is calculated;
3. Significant and relevant: should be informative to users;
4. Analytical: should give a sufficient insight into the phenomena;
5. Complete: should cover the whole population of statistical units or the
whole geographical area;
6. Reliable: should have little statistical error or noise;
7. Comparable: there are different levels of comparability:
7.5. inside comparability: should be possible to compare the same
indicator for two sub-populations or areas;
7.6. outside comparability. should be possible to compare the
indicator with similar indicators from other sources (different
data sources or different producers);
7.7. inter-temporal comparability: should be possible to review the
indicator over time.
To achieve comparability, it is necessary to have clear and constant
definitions and classification;
8. Coherent: should have the same reference period, accountancy criteria
and mode of calculation as other information sources;

10 August 2005
6 STATISTICS ON RURAL DEVELOPMENT AND AGRICULTURE HOUSEHOLD INCOME

9. Continuous: should have no interruptions in the indicator time series;

10. Accessible: should be easy to get by users in terms of effort, time and
money costs;
11. Timeliness: should provide information to users as close as possible to
the occurrence of the phenomena under study;
12. Not expensive: cost of production should be minimised (in terms of
money and the burden on the respondent) in proportion to the
information produced.

For an indicator to be useful in representing any socio-economic attribute, it

should satisfy these 12 points.

VII.4.3 Three dimensions of any indicator

Three dimensions may be identified when assembling any indicator:

1. the state or situation or level of the indicator (such as the percent of females,
25 to 54 years of age, with a secondary school diploma in all rural territorial
units within a country);

2. the dispersion or concentration or variability of this indicator (such as the

GINI Index of Inequality across all rural territorial units of the percent of
females, 25 to 54 years of age, with a secondary school diploma; or perhaps
more simply, the number of rural territorial units where this “percent” is less
than one-half of the national average); and

3. the tendency or trend of this indicator over time.

Each dimension of a given indicator adds important information for the policy
discussion.

The purpose of statistical indicators is to highlight those aspects considered

sufficient to describe the socio-economic characteristics by degree of rurality. First,
to summarise the phenomena it is necessary to produce some measures of the level.
These have to include only principal and uncorrelated components. Second, some
measures of component dispersion and concentration should be provided. Finally, are
things improving of getting worse – what is the trend over time?

Rural households are typically the unit of observation from which data are
tabulated for each rural territorial unit (such as the percent of households with a single
parent as the head of the household). In some cases, the rural area itself becomes the
unit of observation in cases where the statistical agency might publish data collected
from an administrative data source (such as the percent of the municipal budget
allocated to education for a given rural territorial unit).

An example of an indicator calculated on the rural households base is the

normalised mode of per capita real income of the households in a given year in a

10 August 2005
 HANDBOOK ON RURAL HOUSEHOLD, LIVELIHOOD AND WELL-BEING: 7

given rural area3. The dispersion and concentration of this variable can be
measured by the normalised squared error from the mode and the Gini Index of
Inequality.

An example of an indicator calculated from an administrative database might

be the normalised mortality rate for children under 5 years of age for a given year for
a given rural area. The dispersion and concentration indicators could be calculated
across all similar rural areas.

Beside measurements of dimension, dispersion and concentration taken at a

single point in time, it is often useful to have a measure of tendency over time. For
many characteristics of rurality, time series data are necessary to calculate the inter-
temporal rates of improvement or growth, or the average of these rates over a set
period of time. Averaging the rate of growth over, for example, five years might be
preferable to understand tendency because it will exclude short-term volatility.

Finally, we note that each dimension (level, dispersion and tendency) of an

indicator for a given rural territorial unit may be compared to other rural territorial
units or to urban territorial units to obtain a measure of imbalance in development or
to measure a socio-economic discrepancy.

VII.4.4 A graduated sequence of rural indicators

When selecting indicators it must be remembered that not all indicators have
the same informative capacity with respect to the phenomena under observation.
Moreover, too many indicators can create confusion and produce misinformation for
the final user. This is the reason for suggesting a graduated sequence of rural
indicators in this Handbook.

A reasonable hierarchy of indicators is summarised in figure VII.1.

3
Mode is suggested for variables that are not normally distributed among the population even if in
practical terms, as a first approximation, normal mean is applied.

10 August 2005
8 STATISTICS ON RURAL DEVELOPMENT AND AGRICULTURE HOUSEHOLD INCOME

Figure VII.1

I’i[0,1] Summary indicators:

- state or level
- dispersion and
concentration
- tendency over
time

I’j[0,1], J > I
Detailed indicators of selected
main topics

I’k[0,1], K > J > I Analytical indicators

Source: [Link] Task Force.

VII.5 Suggested sets of rural indicators

Here two alternative schemes are presented which evaluate the state, tendency
over time, variability and concentration of rural development.

Scheme 1:

A. Components of rural development

A.1 Natural environment

Character: Quality of the countryside and the condition of the natural environment
(natural resources and wildlife), as necessary requirements to reach a
good quality of life and as an opportunity to enhance the economic
conditions of the rural population.

10 August 2005
 HANDBOOK ON RURAL HOUSEHOLD, LIVELIHOOD AND WELL-BEING: 9

Suggested proxy indicators:

1. State
Per capita drinking water:
cubic metres of drinkable water at time t / population at
time t
Per capita CO2 emission:
tonnes of CO2 emission at time t / population at time t
Per capita energy consumption:
KWh of energy consumption at time t / population at
time t
Biodiversity index: number of animals (farmland birds, wild beasts, farm
animals) at time t / square kilometres of the surface at
time t
Landscape index: square kilometres of land lost from agriculture and
forestry to industrial, housing, road and other uses at
time t / square kilometres of the surface at time t
Waste recycling index:
percent of waste that is recycled at time t
2. Tendency over time
for each indicator:
indicator at time t / indicator at time t-1

A.2 Social well-being

Character: Quality of social life and welfare. Good quality means good education
and health; reduced risks and vulnerability of people.

Suggested proxy indicators:

1. State
Literacy rate: percent of population, aged 15 – 24, who have
completed a given level of formal schooling at time t
Infant mortality rate: number of deaths of infants (under one year of age) per
1,000 live births at time t
Newspapers per capita:
number of newspapers sold at time t / population at
time t
Political rights: percent of the eligible voters who voted in the last
election
Green areas rate: green area as a percent of total area at time t

2. Tendency over time

For each indicator: indicator at time t / indicator at time t-1

A.3 Conditions for economic well-being

Character: Income and wealth of people.
Suggested proxy indicators:
1. State
Real per capita income:
real income at time t / population at time t

10 August 2005
10 STATISTICS ON RURAL DEVELOPMENT AND AGRICULTURE HOUSEHOLD INCOME

2. Tendency
Real per capita income growth:
real per capita income at time t / real per capita income
at time t-1
3. Dispersion and concentration
Real per capita income inequality:
normalised squared error from the mean at time t
Gini Index of Inequality at time t

B. Potential of rural development

B.1 Territory with respect to population

Character: territory available to the rural population to live, to cultivate (usable

agricultural land) and to perform other economic activities.

Suggested proxy indicators:

1. State
Per capita territory: square kilometres of the surface at time t / population at
time t (which is the inverse of the population density)
Per capita AAU: Agricultural Area Utilised (AAU) (square kilometres) by
rural population at time t / rural population at time t
Rural youth: rural population under 14 at time t / rural population at
time t

2. Dispersion
Per capita territory: Number of rural territorial units within each size class
of square kilometres of surface area per inhabitant at
time t
Per capita AAU: Number of rural territorial units within each size class
of AAU at time t

3. Tendency over time

Rural pop. growth: rural population at time t / rural population at time t-1

B.2 Economic structure

Character: Health of the economic environment of the rural population.

Suggested proxy indicators:

1. State
employment rate: population employed at time t / population at time t
local government debt rate:
local government debt in region r at time t / population
in region r at time t
2. Tendency over time
migration rate: percent net flow of population at time t
employment growth rate:

10 August 2005
 HANDBOOK ON RURAL HOUSEHOLD, LIVELIHOOD AND WELL-BEING: 11

population employed at time t / population employed at

time t-1
local government debt reduction:
local government debt in region r at time t / local
government debt in region r at time t-1

B.3 Communications

Character: Ability of rural population to communicate and interact with the rest of
the world.

Suggested proxy indicators:

1. State
Per capita stations: number of stations (railway stations, ports and airports)
at time t / rural population at time t
Per capita telephones:number of telephones (home, mobile and public)
available at time t / population at time t
2. Tendency over time
Per capita stations rate of growth:
number of stations at time t/ number of stations at time
t-1
Per capita telephones rate of growth:
number of telephones at time t / number of telephones at
time t-1

C. Special focus on developing countries

This is a list of characters that are relevant from a developing country perspective.
The construction of indicators is not suggested as the final choice will depend
mainly on data availability in any country.

C.1 Market and institutions

- food price index
- membership in organisations of agricultural producers
C.2 Infrastructure
- rural population with access to electricity
C.3 Poverty
- rural population living on less than $1 a day
- rural child malnutrition
C.4 Agriculture
- agricultural productivity
- food production index
C.5 Natural resource
- forests and deforestation

10 August 2005
 12 STATISTICS ON RURAL DEVELOPMENT AND AGRICULTURE HOUSEHOLD INCOME

C.6 Education
- rural female literacy with respect to rural male literacy
- net rural enrolment ratio in primary education
C.7 Health
- infection among rural population

Scheme 2:

ASSETS, CAPACITY to design and implement strategies and desired

OUTCOMES for sustainable livelihoods

Selected possible indicators for urban and rural One possible rural-specific indicator for
populations this item
Potential indicators of the ASSETS of a locality or region
are:
Natural capital:
How much time per day is required to
Potential drinkable water per capita, within a given time
access and transport water for an average
period
family?
Hectares of arable land per capita
Hectares of forested land per capita
Financial capital:
What share of these "savings" is in fixed
Share of population with savings over a given limit (say,
assets (e.g. land, buildings, machinery) and
with savings greater than one-half of the individual’s
what share is in liquid assets (e.g. stocks,
annual income)
bonds, bank accounts)?
Availability of financial institutions (banks, lending Is the institution required to re-invest a
circles, etc.) within the community / region (e.g. number of certain share of its portfolio in the local
institutions or distance to the nearest institution) community?
Physical capital:
For persons without electricity, what share
Percent of population living in a household with electricity
has no access to electrical services?
Housing stock (number of persons per room in the
dwelling)
Percent of population within one kilometre of a paved road
Percent of population within one hour of an international
airport
Human capital:
Infant mortality rate: number of deaths of children under
For infants who die, what percent die due to
one year of age as a percent of all live births within a given
a lack of access to maternal care?
the time period
Percent of population, for a given age group, who are
literate (For some countries, the OECD Adult Literacy
Survey is appropriate. Alternatively, one might tabulate

10 August 2005
 HANDBOOK ON RURAL HOUSEHOLD, LIVELIHOOD AND WELL-BEING: 13

the share of the population, within a given age group, who

have completed a given number of years of formal
schooling.)
Percent of children, within a given age group, enrolled in For each age group, percent of population
formal schooling living more than 30 minutes from a school.
Percent of population living more than one hour (or one-
half hour) from a hospital
Social capital
Number of newspapers sold per capita, within a given time Share of news that is local, national and
period international
Percent of eligible electors who voted in a recent election
Percent of individuals living in a residence with a
telephone (land line or cell phone)
Percent of individuals of a given age group who participate
in a voluntary organization or community groups
Potential indicators of the CAPACITY to design and implement development strategies would include:
For population 20 to 24 years of age without
Percent of the population, for a given age group, who have a secondary school diploma, percent who
attained a secondary school diploma; live more than 30 minutes from a secondary
school
Percent of population working in, or with experience in,
each of the industrial sectors of the economy (such as
agriculture, manufacturing, tourism, retail sales, etc.)
Percent of population living within 15 minutes of public
transport (bus, train, boat, etc.)
Number of new business starts in the past 12 months, Percent of new entrepreneurs who grew up
calculated on a per capita basis on this locality
Potential indicators of the desired OUTCOMES of the sustainable livelihoods of individuals within urban
or rural communities or regions:
Life expectancy at birth, for males and females
Population change, tabulated for specific age groups and
by gender (some rural communities / regions wish to stop
population decline while other communities / regions wish
to stabilize their populations at new, but lower, sustainable
population level, while there is another group of rural
communities / regions who wish to restrict their population
growth from in-migrants);
Employment rate (percent of individuals in a given age and
gender group, who are employed – in wage work or self-
employed or as an unpaid family worker);
Earned income per worker(1) (by age and gender)
Percent of population living in poverty (using the measure
of poverty suitable for each country, to determine urban –
rural differences)

10 August 2005
 14 STATISTICS ON RURAL DEVELOPMENT AND AGRICULTURE HOUSEHOLD INCOME

Percent of population, for a given age group, that dies from

a preventable cause (e.g., accidents, communicable
disease, AIDS, etc.)
(1) One common indicator for international comparisons is the GDP per capita. This is problematic for sub-national analysis.
Many countries do not prepare a sub-national set of national accounts – and most certainly not for rural and urban areas. The
ability to correctly assign the earnings of labour and the earnings of capital, let alone the number of workers, to the appropriate
sub-national geography is problematic (although admittedly still a popular activity for some). Caution is called upon against
placing undue emphasis on the calculation of GDP per capita for sub-national areas.

10 August 2005