Household Economy Analysis
Household Economy Analysis (HEA) is a livelihoods-based framework designed to provide a clear representation of the inside workings of household economies at different levels of wealth and in different parts of the world.
The animation to the right provides an introduction to HEA and its uses for policy makers and aid practitioners. It was produced by the Food Economy Group (FEG).
What is HEA?
HEA is based on the principle that having a detailed understanding of how people make ends meet – that is, their food, income and expenditure sources – is essential for assessing how livelihoods will be affected by wider economic or ecological change and for planning interventions that will support, rather than undermine, their existing survival strategies.
At the heart of the HEA is an analysis of:
1. how people in different social and economic circumstances get the food and cash they need;
2. their assets, the opportunities open to them and the constraints they face; and
3. the options open to them at times of crisis. It involves the analysis of the connections among different groups and different areas, providing a picture of how assets are distributed within a community and who gets what from whom.
This information can be used for a wide range of purposes, including development planning, emergency response, early warning, monitoring and evaluation, poverty analysis and reduction, and policy analysis.
Since the late 1990s, HEA has been adapted for use in various settings and for a range of programming needs. It has been used in rural and urban contexts, in areas prone to food crises as a result of droughts or market shocks, in countries with established, national early warning systems, in emergency and development contexts, and in refugee and IDP contexts. It was originally developed as a tool for early warning of acute food insecurity but is used increasingly in wider programme design including social protection and livelihoods programmes including the following:
- Contingency and response planning.
- Emergency and post-emergency needs assessments.
- Resilient livelihoods programme design.
- Cash and voucher assistance, and safety nets and social protection programmes.
- Poverty reduction strategies.
- Project monitoring and evaluation.
- Resilience measurement.
- Geographic and household targeting.
The HEA Framework
An HEA baseline provides a quantified picture of people’s food and income sources and expenditure patterns.
- Analysis is done according to ‘livelihood zones’ (i.e. geographical areas where people broadly share the same livelihood options and access to markets).
- Livelihoods are described according to wealth (i.e. for very poor, poor, middle and better off households).
- Analysis is for a named ‘reference’ or typical year.
Outcome Analysis is the investigation of how the HEA baseline access to food and income might change as a result of a hazard such as drought or as the result of a positive change, such as a livelihoods programme.
- Seasonal monitoring data or project data is translated into economic consequences at household level (e.g. 30% reduction in crop production or 20% reduction in livestock prices compared to the baseline); this is called the ‘problem specification’.
- The analysis takes into account households’ capacity to cope themselves (e.g. capacity to earn more cash through labouring or selling more livestock).
- The projected outcome is the estimated shortfall in food and income faced by different wealth groups in terms of (usually) two thresholds: the amount needed to (a) survive and (b) maintain their livelihoods.
A simplified illustration of HEA:
The ‘y’ axis represents food and income as a percentage of minimum annual calorie requirements. In short, food and income sources are converted into kilocalories which are then compared to 2100 kcal, which represents the internationally accepted minimum energy requirement per person per day.
Baseline: The first bar shows total access to food and income in a reference year. This is the baseline picture before the shock.
Effects of problem without coping: The second bar shows how access is affected by a shock like drought in a neighbouring country, which means local labour markets are flooded, reducing income from labour.
Outcome analysis: The third bar shows access to food and income taking into account the household’s coping strategies. In this case, more animals are sold than usual
At the heart of HEA is a detailed accounting of how people get by from year to year and the connections with other people and places that enable them to do so. This is called the baseline and is a set of data on food, income, expenditure and assets for each of (usually) four wealth groups: very poor, poor, middle and better-off. The data relates to a defined 12-month period or ‘reference’ year.
A baseline assessment has three components:
- Livelihood zoning.
- Wealth breakdown.
- Analysis of livelihood strategies for each of the identified wealth groups.
A livelihood zone is an area within which people share basically the same patterns of access to food (that is, they grow the same crops, or keep the same types of livestock), and have the same access to markets.
Zoning involves the preparation of maps, together with analyses of the options for obtaining food and income within each zone and the marketing networks that determine the patterns of exchange between zones.
The three steps of a Baseline Assessment.
A full HEA baseline takes about four weeks and requires a team of about eight people, led by at least one experienced HEA practitioner. This includes a week of training, two weeks of field work and a week of data entry and analysis. The cost of a baseline can greatly vary depending on the context, but is typically around $20-40,000.
One of the most innovative aspects of HEA is the ability to model the impact of positive or negative changes on household access to food and income. This process is called outcome (or scenario) analysis.
Outcome analysis assesses:
- how baseline access to food and cash will be affected by the change
- in the case of a shock, the extent to which households will be able to make up food or cash shortfalls themselves
- in the case of an intervention, the contribution any additional or freed-up income will make to the household economy.
The three steps of an Outcome Analysis.
The hazard is translated into quantified consequences to household livelihood strategies, such as a percentage fall in crop production or an increase in food prices.
Training in outcome analysis takes between three and five days. It covers the steps and calculations involved in outcome analysis, the monitoring data that needs to be entered, what to do when that data isn’t available, and how to use the Dashboard and LIAS.
A user-friendly Excel-based tool with which the user can run an outcome analysis for a particular livelihood zone or district. It enables the user to model the potential impact of different interventions as well as the impact of shocks.
A more complex Excel-based tool with which the user can run an outcome analysis on a large scale. Detailed problem specifications can be entered by administrative area for up to 12 livelihood zones. The LIAS is an essential tool where HEA is used in national early warning systems.
Excel based files that are designed for complex HEA outcome analyses involving multiple LIASs (e.g. for a whole country, or for a region/ province within a country). It can also be used to run a sequence of years of analyses.
Uses of HEA
Since the late 1990s, HEA has been adapted for use in various settings and for a range of programming needs. It has been used in rural and urban contexts, in areas prone to food crises, in emergency and development contexts, and in refugee and IDP contexts. It was originally developed as a tool for early warning of acute food insecurity but is used increasingly in wider programme design including for social protection and livelihoods strengthening. More specifically it can be used for:
- early warning of acute food insecurity
- contingency planning, anticipatory action, and response planning
- the design of social protection and safety net programmes and for cash and voucher assistance
- the design of livelihoods and poverty reduction programmes
- emergency needs assessment (‘rapid’ HEA)
- needs assessments in urban areas, refugee camps, and internally displaced populations
- resilience measurement
- project monitoring and evaluation.
- HEA is valued in early warning systems because it takes into account people’s access to food and cash, not just the amount they produce, and their capacity to cope.
- It generates quantitative estimates of how much food or cash will be needed to meet particular thresholds, for how many people and for how many months.
- It can be used at scale.
- It is used in government early warning systems in east, west and southern Africa (see the HEA Sahel project site for details) and is a key indicator in the Integrated Phase Classification framework (IPC), the globally used system for classifying food insecurity, and the west African Cadre Harmonisé.
- It indicates which groups within a population will face a deficit.
- In areas prone to slow-onset food crises, HEA can model future scenarios based on forecasts and help to trigger early action.
- Rather than responding to actual need after the shock has occurred and households have reverted to damaging coping strategies, anticipatory action mitigates the predicted impact of a shock.
- In recent years, Save the Children has used HEA to help trigger anticipatory action for below normal rains in Ethiopia, Niger and Malawi in the form of pro-active, no-regrets activities.
- HEA expenditure data collected in a baseline can help to determine the gap between the current and desired standard of living.
- ‘Livelihood protection’ thresholds defined during the baseline indicate the minimum income needed for households to maintain their livelihoods. The thresholds are calculated from baseline expenditure data and are used in outcome analysis to calculate transfer values.
- Thresholds that incorporate sector-specific international standards (i.e. on WaSH, shelter, education, health etc.) and/or targets for expenditure on children can also be used. Save the Children developed guidance on use of HEA to inform Minimum Expenditure Baskets (2018).
- HEA has been used by SC in the design of safety nets in Sierra Leone, Maiduguri in Nigeria, Kenya and Myanmar
- A baseline assessment can guide the selection of interventions because it constitutes a form of poverty analysis at household level.
- Baseline data helps programme planners to avoid selecting interventions that would not benefit the poorest households.
- HEA modelling can indicate interventions that would have the greatest impact, and those that would have minimal or no impact, or actually cause harm.
- HEA can be used in emergency situations to assess whether households can meet their basic food and livelihoods needs.
- It is used in this way when a full baseline is not available.
- The framework is the same as for a full HEA: the analysis is based on an understanding of the baseline (pre-emergency) situation, what effect a defined shock has had, and how people have responded.
- The main differences between a rapid HEA and a full HEA are:
- In a rapid HEA, the monitoring information – i.e. on the shock – is gathered at the same time as the baseline assessment
- The field methods often have to be adapted to get as much information as possible in less than ideal circumstances
- The total quantity of information is less than in a full HEA
- Rapid HEA is led by one or two very experienced HEA practitioners with a small team, usually visiting about 5 villages instead of 8-12 villages
- The results of a rapid HEA are not valid beyond the year when the assessment is carried out.
- ‘Rapid HEA’ was used in Nepal after the earthquake and in the Philippines after the typhoon.
- Usually undertaken to learn more about the increasing urban population, especially the poorest, or to assess need and set up livelihood monitoring following conflict or unrest.
- Key difference from rural areas is dependence on market and vulnerability to price changes.
- Casual labour, petty trade and small-scale business are the main income-generating activities.
- Seasonal variations are less marked and timing of hazards is less predictable. Therefore monitoring of urban livelihoods is often carried out monthly rather than in a one-off assessment once or twice a year.
- Because of heterogeneity of urban livelihoods, focus is on expenditure as poor families tend to spend similar amounts on similar things.
- Because HEA converts food and cash to a common currency (minimum food energy needs), incomes can be compared across a country and over time
- Incomes in different areas can be compared with sector minimum expenditure baskets to see where the shortfall is greatest
- HEA also provides a measure of livelihood security, called the livelihoods protection score: effectively, how much income households have to ‘spare’ over and above the total cost of maintaining their livelihood (i.e. the livelihoods protection threshold). This is helpful because people with the highest cash incomes are not always those with the greatest margin over costs, as higher cash incomes are often associated with higher maintenance costs.
- HEA’s wealth breakdown helps in household targeting as it provides locally defined criteria by which to identify the poorest households.
- With HEA outcome analysis, you can model the impact of planned or actual livelihood interventions on household resilience, i.e. see whether households can recover sufficiently after a hazard without using damaging coping strategies.
- Outcome analysis generates a ‘resilience score’ for each wealth group: the ratio of total income after a shock to the livelihoods protection threshold (i.e. the cost of maintaining that livelihood).
- With outcome analysis, you can model the effect of different projects on the resilience score to see which is most effective at increasing income up to or above the livelihood protection threshold following a locally relevant shock.
- The HEA resilience score can be compared across socio-economic groups and geographic areas.
- HEA resilience modelling can also be used in impact evaluation, e.g. in the 2018 evaluation of the international NGO cash transfer in Malawi. HEA was used to estimate the recovery capacity of very poor households and to assess their need for support in the next year.
- HEA baseline surveys can be run at the start and end of a project to evaluate impact on household food, income, expenditure and assets.
- Often this is done using ‘individual’ HEA (IHEA), which follows up on individual households and requires some statistical analysis.
- HEA can be used in an evaluation even if a baseline was not carried out at the start, by collecting data on the reference (pre-project) year as well as data in the current year.
- HEA has been used to evaluate cash transfer programs and find out how households spent their cash, whether that included child-focused goods and services and investment in livelihood recovery, and how the cash transfer amount compared to the food and income they secured themselves.
Save the Children's Common Approach
In 2018, HEA was endorsed by Save the Children as a common approach.
A common approach is a term used in Save the Children to reflect our best understanding of how to solve a particular problem for children. It is based on evidence and can be adapted to work in multiple contexts and replicated in different countries.
The aim is to help raise the quality of Save the Children’s work. Each common approach comes with a comprehensive set of tools and guidance for addressing a particular problem. This means country offices do not need to start from scratch each time they approach a problem. Instead, they will have more time for innovation and finding ways to adapt, learn and refine solutions to their own context.
As common approaches are used more and more across the world, Save the Children will be able to more easily measure success and learn from failure, so that ultimately we can do more for children.
The Thematic Strategy Group endorses common approaches when they meet the following criteria:
- Supporting evidence of impact is rigorously documented.
- Guidance for design, implementation, monitoring and evaluation of the approach is documented and toolkits provided.
- Save the Children has substantial experience with the approach and/or developed it.
- The approach can be adapted and contextualized, and has been replicated.
- There is evidence of cost-effectiveness and the approach can be scaled up.
- The approach is subject to continuous improvement with a clear learning agenda.
- It includes robust guidelines on child safeguarding and gender equality.
Each common approach has or is developing a learning programme that identifies the resources, activities and assessments necessary to achieve bronze, silver and gold levels. Details of the HEA learning programme will be made available here.
Household economy analysis (15 pages)
Household economy analysis (2 pages)
Save the Children staff can also access the Child Poverty Common Approaches area on the intranet.