Am trying to develop a composite indicator for socio-economic classes using data on ownership of various assets (such as a car, fridge, etc). I have total household expenditures which can be used to estimate the strength of the model.
Am confused as to whether to use factor analysis, regression, or Rasch models (Item Response Theory), or data envelopment techniques.
Dear Jawaid
The factor analysis can help you for the classification of the total amount of your variables into constructors. Folow that you can do the regression analysis for that constructors.
The challenge with this analysis is the sample size, its recomendable a sample of 300-1000 for good results. Kaiser (1970).
You can see examples for this analysis in: http://personality-project.org/r/psych/HowTo/factor.pdf
I hope this info help you.
Dear Jawaid,
The technique depends on your variable types and data analysis objectives. Some of your variables seem to be categorical, so latent-class-analysis could be an option. But more info is needed in order to give a suggestion.
Best,
Ruben.
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