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The Time Lag In Annual Household‐Based Income Measures: Assessing And Correcting The Bias

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  • Annelies Debels
  • Leen Vandecasteele

Abstract

Annual income data are typically provided with a time lag. This article reviews several ways of dealing with this time lag in the construction of annual household‐based income measures for individual economic well‐being. It also proposes an alternative method that yields better estimates for equivalized household income, especially in the case of household composition change. Next, the two most commonly applied income measures are compared to this alternative measure with empirical income data from the European Community Household Panel. This comparison reveals that ignoring the time lag and household changes leads to substantial bias in income and poverty estimates and to erroneous conclusions about the determinants of poverty entry. The evidence in this article will be useful to researchers who want to make a well‐informed choice between different annual income measures.

Suggested Citation

  • Annelies Debels & Leen Vandecasteele, 2008. "The Time Lag In Annual Household‐Based Income Measures: Assessing And Correcting The Bias," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(1), pages 71-88, March.
    • Handle: RePEc:bla:revinw:v:54:y:2008:i:1:p:71-88
    DOI: 10.1111/j.1475-4991.2007.00260.x
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    Cited by:

    1. Katja Landau & Stephan Klasen & Walter Zucchini, 2012. "Measuring Vulnerability to Poverty Using Long-Term Panel Data," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 118, Courant Research Centre PEG.
    2. Veronica Polin & Michele Raitano, 2012. "Poverty Dynamics in Clusters of European Union Countries: Related Events and Main Determinants," Working Papers 10/2012, University of Verona, Department of Economics.
    3. Ayllón, Sara & Fusco, Alessio, 2017. "Are income poverty and perceptions of financial difficulties dynamically interrelated?," Journal of Economic Psychology, Elsevier, vol. 61(C), pages 103-114.
    4. Sara Ayllón, 2013. "Understanding poverty persistence in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(2), pages 201-233, June.
    5. José Arranz & Olga Cantó, 2012. "Measuring the effect of spell recurrence on poverty dynamics—evidence from Spain," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(2), pages 191-217, June.
    6. Olga Cantó & Carlos Gradín & Coral Del Río, 2012. "Pobreza Crónica, Transitoria Y Recurrente En España," Revista de Economia Aplicada, Universidad de Zaragoza, Departamento de Estructura Economica y Economia Publica, vol. 20(1), pages 69-94, Spring.
    7. Ayllón, Sara, 2009. "Modelling state dependence and feedback effects between poverty, employment and parental home emancipation among European youth," Working Papers 10, VATT Institute for Economic Research.
    8. Carlos Martins & Nuno Alves, 2015. "Income smoothing mechanisms after labor market transitions," Working Papers w201510, Banco de Portugal, Economics and Research Department.
    9. Jean-Yves Gerlitz, 2018. "Rising In-work Poverty in Times of Activation: Changes in the Distributive Performance of Institutions over Three Decades, Germany 1984–2013," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 140(3), pages 1109-1129, December.
    10. Iryna Kyzyma & Donald R. Williams, 2017. "Public cash transfers and poverty dynamics in Europe," Empirical Economics, Springer, vol. 52(2), pages 485-524, March.
    11. Sheng, Jichuan & Qiu, Wenge, 2022. "Water-use technical efficiency and income: Evidence from China's South-North Water Transfer Project," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    12. E. Bárcena-Martín & S. Pérez-Moreno, 2017. "Immigrant–native gap in poverty: a cross-national European perspective," Review of Economics of the Household, Springer, vol. 15(4), pages 1105-1136, December.
    13. Andriopoulou, Eirini & Tsakloglou, Panagiotis, 2011. "The determinants of poverty transitions in Europe and the role of duration dependence," MPRA Paper 30659, University Library of Munich, Germany.
    14. Sara Ayllón, 2015. "Youth Poverty, Employment, and Leaving the Parental Home in Europe," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(4), pages 651-676, December.
    15. Joachim R. Frick & Kristina Krell, 2010. "Measuring Income in Household Panel Surveys for Germany: A Comparison of EU-SILC and SOEP," SOEPpapers on Multidisciplinary Panel Data Research 265, DIW Berlin, The German Socio-Economic Panel (SOEP).
    16. Ehlert, Martin, 2016. "The Impact of Losing Your Job: Unemployment and Influences from Market, Family, and State on Economic Well-Being in the US and Germany," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 184652, July.
    17. Carlos Martins & Nuno Alves, 2012. "Mobility and income inequality in the European Union and in Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.

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