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Further Results on Measuring the Well-Being of the Poor Using Income and Consumption

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  • Bruce D. Meyer
  • James X. Sullivan

Abstract

In the U.S., analyses of poverty rates and the effects of anti-poverty programs rely almost exclusively on income data. In earlier work (Meyer and Sullivan, 2003) we emphasized that conceptual arguments generally favor using consumption data to measure the wellbeing of the poor, and, on balance, data quality issues favor consumption in the case of single mothers. Our earlier work did not show that income and consumption differ in practice. Here we further examine data quality issues and show that important conclusions about recent trends depend on whether one uses consumption or income. Changes in the distribution of resources for single mothers differ sharply in recent years depending on whether measured by income or consumption. Measures of overall and sub-group poverty also sharply differ. In addition to examining broader populations and a longer time period, we also consider new dimensions of data quality such as survey and item nonresponse, imputation, and precision. Finally, we demonstrate the flaws in recent research that concludes that consumption and income trends are similar for disadvantaged households, and that consumption data at the bottom are of lower quality than income data.

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Bibliographic Info

Paper provided by Harris School of Public Policy Studies, University of Chicago in its series Working Papers with number 0719.

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Date of creation: Aug 2007
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Handle: RePEc:har:wpaper:0719

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Keywords: poverty; measurement; income; consumption;

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References

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  1. Slesnick, Daniel T, 1993. "Gaining Ground: Poverty in the Postwar United States," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 1-38, February.
  2. Kasia O'Neill Murray & Wendell E. Primus, 2005. "Recent Data Trends Show Welfare Reform to Be a Mixed Success: Significant Policy Changes Should Accompany Reauthorization," Review of Policy Research, Policy Studies Organization, vol. 22(3), pages 301-324, 05.
  3. Martin Browning & Thomas F. Crossley & Guglielmo Weber, 2002. "Asking Consumption Questions in General Purpose Surveys," Social and Economic Dimensions of an Aging Population Research Papers 77, McMaster University.
  4. Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 163-193.
  5. Bruce D. Meyer & Dan T. Rosenbaum, 1999. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers," NBER Working Papers 7363, National Bureau of Economic Research, Inc.
  6. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
  7. Sawhill, Isabel V, 1988. "Poverty in the U.S.: Why Is It So Persistent?," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1073-119, September.
  8. Jonathan Gruber, 1994. "The Consumption Smoothing Benefits of Unemployment Insurance," NBER Working Papers 4750, National Bureau of Economic Research, Inc.
  9. David M. Cutler & Lawrence F. Katz, 1991. "Macroeconomic Performance and the Disadvantaged," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 1-74.
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Cited by:
  1. Oster, Emily & Shoulson, Ira & Quaid, Kimberly & Dorsey, E. Ray, 2010. "Genetic adverse selection: Evidence from long-term care insurance and Huntington disease," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 1041-1050, December.
  2. Shawn Fremstad, 2010. "A Modern Framework for Measuring Poverty and Basic Economic Security," CEPR Reports and Issue Briefs 2010-12, Center for Economic and Policy Research (CEPR).
  3. Bruce Meyer & James X. Sullivan, 2010. "Five Decades of Consumption and Income Proverty," Working Papers 2010-003, Becker Friedman Institute for Research In Economics.
  4. Zilanawala, Afshin & Pilkauskas, Natasha V., 2012. "Material hardship and child socioemotional behaviors: Differences by types of hardship, timing, and duration," Children and Youth Services Review, Elsevier, vol. 34(4), pages 814-825.
  5. William Passero & Thesia I. Garner & Clinton McCully, 2014. "Understanding the Relationship: CE Survey and PCE," NBER Chapters, in: Improving the Measurement of Consumer Expenditures National Bureau of Economic Research, Inc.
  6. Bruce D. Meyer & James X. Sullivan, 2011. "Consumption and Income Poverty over the Business Cycle," NBER Working Papers 16751, National Bureau of Economic Research, Inc.
  7. William Passero & Thesia I. Garner & Clinton McCully, 2013. "Understanding the Relationship: CE Survey and PCE," Working Papers 462, U.S. Bureau of Labor Statistics.
  8. Bruce D. Meyer & Wallace K. C. Mok & James X. Sullivan, 2009. "The Under-Reporting of Transfers in Household Surveys: Its Nature and Consequences," Working Papers 0903, Harris School of Public Policy Studies, University of Chicago.

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