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Consumption and Economic Well-Being at Older Ages: Income- and Consumption-Based Poverty Measures in the HRS

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Author Info
Michael Hurd (RAND and NBER)
Susann Rohwedder (RAND)

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Abstract

According to economic theory, well-being or utility depends on consumption. However, at the household level, total consumption is rarely well measured because its collection requires a great deal of survey time. As a result income has been widely used to assess well-being and poverty rates. Yet, because households can use wealth to consume more than income, so an income-based measure of well-being could yield misleading results for many households. We use data from the Health and Retirement Study to find income-based poverty rates which we compare with poverty rates as measured in the Current Population Survey. We use HRS consumption data to calculate a consumption-based poverty rate and study the relationship between income-based and consumption-based poverty measures. We find that a poverty rate based on consumption is lower than an income-based poverty rate. Particularly noteworthy is the much lower rate among the oldest single persons such as widows. The explanation for the difference is the ability to consume out of wealth.

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Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp110.

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Length: 40 pages
Date of creation: Jan 2006
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Handle: RePEc:mrr:papers:wp110

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Jesus Fernandez-Villaverde & Dirk Krueger, 2002. "Consumption over the Life Cycle: Some Facts from Consumer Expenditure Survey Data," Centro de Alti­simos Estudios Ri­os Pe©rez(CAERP) 7, Centro de Altisimos Estudios Rios Perez (CAERP). [Downloadable!]
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  2. Bruce D. Meyer & James X. Sullivan, 2003. "Measuring the Well-Being of the Poor Using Income and Consumption," NBER Working Papers 9760, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Slesnick, Daniel T, 1994. "Consumption, Needs and Inequality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 677-703, August. [Downloadable!] (restricted)
  4. Jesus Fernandez-Villaverde & Dirk Krueger, 2002. "Consumption over the Life Cycle: Facts from Consumer Expenditure Survey Data," NBER Working Papers 9382, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Thesia I. Garner & Kathleen Short, 2005. "Economic Well-Being Based on Income, Consumer Expenditures and Personal Assessments of Minimal Needs," Working Papers 381, U.S. Bureau of Labor Statistics. [Downloadable!]
  6. Peter Saunders, 1997. "Poverty, Choice and Legitimacy," Discussion Papers 0076, University of New South Wales, Social Policy Research Centre. [Downloadable!]
  7. Short, Kathleen, et al, 1998. "Poverty-Measurement Research Using the Consumer Expenditure Survey and the Survey of Income and Program Participation," American Economic Review, American Economic Association, vol. 88(2), pages 352-56, May. [Downloadable!] (restricted)
  8. Jorgenson, Dale W, 1998. "Did We Lose the War on Poverty?," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 79-96, Winter. [Downloadable!] (restricted)
  9. Jorgenson, Dale W & Slesnick, Daniel T, 1987. "Aggregate Consumer Behavior and Household Equivalence Scales," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 219-32, April.
  10. Michael Hurd & F. Thomas Juster & James P. Smith, 2003. "Enhancing the Quality of Data on Income: Recent Innovations from the HRS," Journal of Human Resources, University of Wisconsin Press, vol. 38(3). [Downloadable!] (restricted)
  11. 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. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lennart Flood & Anders Klevmarken & Andreea Mitrut, 2006. "The Income of the Swedish Baby Boomers," IZA Discussion Papers 2354, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Christopher House & John Laitner & Dmitriy Stolyarov, 2006. "Home Production by Dual Earner Couples and Consumption During Retirement," Working Papers wp143, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
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