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Is the Consumer Expenditure Survey representative by income?

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  • John Sabelhaus
  • David Johnson
  • Stephen Ash
  • Thesia Garner
  • John Greenlees
  • Steve Henderson
  • David Swanson
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    Abstract

    Aggregate under-reporting of household spending in the Consumer Expenditure Survey (CE) can result from two fundamental types of measurement errors: higher-income households (who presumably spend more than average) are under-represented in the CE estimation sample, or there is systematic under-reporting of spending by at least some CE survey respondents. Using a new data set linking CE units to zip-code level average Adjusted Gross Income (AGI), we show that the very highest-income households are less likely to respond to the survey when they are sampled, but unit non-response rates are not associated with income over most of the income distribution. Although increasing representation at the high end of the income distribution could in principle significantly raise aggregate CE spending, the low reported average propensity to spend for higher-income respondent households could account for at least as much of the aggregate shortfall in total spending.

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    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2012-36.

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    Date of creation: 2012
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    Handle: RePEc:fip:fedgfe:2012-36

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    1. Burkhauser, Richard V. & Feng, Shuaizhang & Jenkins, Stephen P. & Larrimore, Jeff, 2009. "Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data," IZA Discussion Papers 4426, Institute for the Study of Labor (IZA).
    2. Martin Browning & Thomas Crossley, 2009. "Are two cheap, noisy measures better than one expensive, accurate one?," IFS Working Papers W09/01, Institute for Fiscal Studies.
    3. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2009. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States, 1967-2006," NBER Working Papers 15483, National Bureau of Economic Research, Inc.
    4. Thomas F. Crossley, 2009. "Measuring Consumption and Saving: Introduction," Fiscal Studies, Institute for Fiscal Studies, vol. 30(Special I), pages 303-307, December.
    5. Orazio Attanasio & Gabriella Berloffa & Richard Blundell & Ian Preston, 2002. "From Earnings Inequality to Consumption Inequality," Economic Journal, Royal Economic Society, vol. 112(478), pages C52-C59, March.
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