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The Role of Prices in Measuring the Poor's Living Standards

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Listed:
  • Christian Broda
  • Ephraim Leibtag
  • David E. Weinstein

Abstract

In this paper, we revisit two pieces of conventional wisdom in the current debate about poverty, paying close attention to the price data underlying these findings: that the poor pay more than households of higher income for the goods and services they purchase; and that poverty rates, at least as measured by the U.S. Census, have remained essentially flat since the late 1960s, raising questions about the success of the policies implemented to reduce poverty. By examining scanner data on thousands of household purchases, we find that the poor pay less —not more—for the goods they purchase. And by extending the advances on price measurement in the recent decade back to the 1970s, we find that current poverty rates are less than half of the official numbers.

Suggested Citation

  • Christian Broda & Ephraim Leibtag & David E. Weinstein, 2009. "The Role of Prices in Measuring the Poor's Living Standards," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 77-97, Spring.
  • Handle: RePEc:aea:jecper:v:23:y:2009:i:2:p:77-97
    Note: DOI: 10.1257/jep.23.2.77
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.2.77
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    References listed on IDEAS

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    1. Betancourt, Roger R & Gautschi, David A, 1993. "The Outputs of Retail Activities: Concepts, Measurement and Evidence from U.S. Census Data," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 294-301, May.
    2. Mark Aguiar & Erik Hurst, 2007. "Life-Cycle Prices and Production," American Economic Review, American Economic Association, vol. 97(5), pages 1533-1559, December.
    3. Leibtag, Ephraim S. & Kaufman, Phillip R., 2003. "Exploring Food Purchase Behavior of Low-Income Households: How Do They Economize?," Agricultural Information Bulletins 33711, United States Department of Agriculture, Economic Research Service.
    4. David E. Lebow & Jeremy B. Rudd, 2003. "Measurement Error in the Consumer Price Index: Where Do We Stand?," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 159-201, March.
    5. Einav, Liran & Leibtag, Ephraim S. & Nevo, Aviv, 2008. "On the Accuracy of Nielsen Homescan Data," Economic Research Report 56490, United States Department of Agriculture, Economic Research Service.
    6. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    7. repec:fth:prinin:446 is not listed on IDEAS
    8. Michael J. Boskin, 1998. "Consumer Prices, the Consumer Price Index, and the Cost of Living," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 3-26, Winter.
    9. Kaufman, Phillip R. & MacDonald, James M. & Lutz, Steve M. & Smallwood, David M., 1997. "Do the Poor Pay More for Food? Item Selection and Price Differences Affect Low-Income Household Food Costs," Agricultural Economics Reports 34065, United States Department of Agriculture, Economic Research Service.
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    More about this item

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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