Exploring unobserved household living conditions in multilevel choice modeling: An application to contraceptive adoption by Indian women.

This research analyzes the effect of the poverty-wealth dimension on contraceptive adoption by Indian women when no direct measures of income/expenditures are available to use as covariates. The index-Household Living Conditions (HLC)-is based on household assets and dwelling characteristics and is computed by an item response model simultaneously with the choice model in a new single-step approach. That is, the HLC indicator is treated as a latent covariate measured by a set of items, it depends on a set of concomitant variables, and explains contraceptive choices in a probit regression. Additionally, the model accounts for complex survey design and sample weights in a multilevel framework. Regarding our case study on contraceptive adoption by Indian women, results show that women with better household living conditions tend to adopt contraception more often than their counterparts. This effect is significant after controlling other factors such as education, caste, and religion. The external validation of the indicator shows that it can also be used at aggregate levels of analysis (e.g., county or state) whenever no other indicators of household living conditions are available.