Measuring the Return on Household Enterprise: What Matters Most for Whom?

Robert M. Townsend and Krislert Samphantharak. Journal of Development Economics Special Issue on Measurement. Forthcoming.

Return on assets (ROA) from household enterprise is crucial for understanding the well being and productivity of households in developing economies. Yet the definition and measurement of household enterprise ROA remain inconsistent or unclear. This paper illustrates potential measurement problems with examples from various actual surveys. The three issues that matter most for accurate measurement of household enterprise ROA are the choice of accrual versus cash basis of income, the treatment of household's own labor in enterprise income, and the treatment of non-factor income. This paper provides thus recommendations on how to improve the survey questionnaires for more accurate measurement in field research.  LINK