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Income, expenditure and the living standards of UK households

Author

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  • Richard Blundell

    () (Institute for Fiscal Studies and University College London)

  • Ian Preston

    () (Institute for Fiscal Studies and University College London)

Abstract

Despite the widespread use of income as a measure of household welfare, there is much to recommend the use of consumption. Indeed, standard economic arguments suggest that consumption expenditure will better reflect expected lifetime resources and many economists have been unequivocal in advocating its use. Slesnick (1993), for example, suggests that ‘From a theoretical perspective it is more appropriate to evaluate poverty using a consumption based measure of household welfare’. Cutler and Katz (1992) state that ‘Economic theory suggests that permanent income or consumption is a more accurate measure of the distribution of resources than is current income’. Poterba (1989) argues that `If households base their spending plans on their expected lifetime income, then consumption provides a more accurate measure of resources than does annual income’.

Suggested Citation

  • Richard Blundell & Ian Preston, 1995. "Income, expenditure and the living standards of UK households," Fiscal Studies, Institute for Fiscal Studies, vol. 16(3), pages 40-54, August.
  • Handle: RePEc:ifs:fistud:v:16:y:1995:i:3:p:40-54
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    File URL: http://www.ifs.org.uk/fs/articles/fsblundellandpreston.pdf
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    References listed on IDEAS

    as
    1. Poterba, James M, 1989. "Lifetime Incidence and the Distributional Burden of Excise Taxes," American Economic Review, American Economic Association, vol. 79(2), pages 325-330, May.
    2. Richard Blundell & Martin Browning & Costas Meghir, 1994. "Consumer Demand and the Life-Cycle Allocation of Household Expenditures," Review of Economic Studies, Oxford University Press, vol. 61(1), pages 57-80.
    3. Banks, James & Blundell, Richard & Preston, Ian, 1994. "Life-cycle expenditure allocations and the consumption costs of children," European Economic Review, Elsevier, vol. 38(7), pages 1391-1410, August.
    4. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-231, March.
    5. McClements, L. D., 1977. "Equivalence scales for children," Journal of Public Economics, Elsevier, vol. 8(2), pages 191-210, October.
    6. 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.
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    Citations

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    Cited by:

    1. Richard Blundell & Hamish Low & Ian Preston, 2013. "Decomposing changes in income risk using consumption data," Quantitative Economics, Econometric Society, vol. 4(1), pages 1-37, March.
    2. Pandey, Manoj K., 2008. "Association between marital status and health: examining the role of age and gender," MPRA Paper 15923, University Library of Munich, Germany.
    3. Erich Battistin & Richard Blundell & Arthur Lewbel, 2009. "Why Is Consumption More Log Normal than Income? Gibrat's Law Revisited," Journal of Political Economy, University of Chicago Press, vol. 117(6), pages 1140-1154, December.
    4. Manoj K. Pandey, 2009. "Poverty and Disability among Indian Elderly: Evidence from Household Survey," ASARC Working Papers 2009-10, The Australian National University, Australia South Asia Research Centre.
    5. Pandey, Manoj K., 2008. "Ageing, marital status and its health implications: evidences from India," MPRA Paper 15370, University Library of Munich, Germany.
    6. Brewer, Mike & O'Dea, Cormac, 2012. "Measuring living standards with income and consumption: evidence from the UK," ISER Working Paper Series 2012-05, Institute for Social and Economic Research.
    7. Manoj K. Pandey, 2009. "On Ageing, Health and Poverty in Rural India," ASARC Working Papers 2009-14, The Australian National University, Australia South Asia Research Centre.
    8. Koeniger, Winfried, 2001. "Labor and Financial Market Interactions: The Case of Labor Income Risk and Car Insurance in the UK 1969-95," IZA Discussion Papers 240, Institute for the Study of Labor (IZA).
    9. Thomas F. Crossley & Krishna Pendakur, 2002. "Consumption Inequality," Department of Economics Working Papers 2002-09, McMaster University.
    10. R. Alessie & A.S. Kalwij, 2003. "Permanent and Transitory Wage Inequality of British Men, 1975-2001: Year, Age and Cohort Effects," Working Papers 03-04, Utrecht School of Economics.
    11. Whitehouse, Edward, 2000. "How Poor are the Old? A Survey of Evidence from 44 Countries," MPRA Paper 14177, University Library of Munich, Germany.
    12. Dickens, Richard, 1996. "The evolution of individual male earnings in Great Britain 1974-1994," LSE Research Online Documents on Economics 20647, London School of Economics and Political Science, LSE Library.
    13. Disney, Richard & Whitehouse, Edward, 2001. "Cross-country comparisons of pensioners’ incomes," MPRA Paper 16345, University Library of Munich, Germany.
    14. Alissa Goodman & Steven Webb, 1995. "The distribution of UK household expenditure, 1979-92," Fiscal Studies, Institute for Fiscal Studies, vol. 16(3), pages 55-80, August.
    15. repec:aia:aiaswp:wp18 is not listed on IDEAS
    16. Ken Judge & Iain Paterson, 2001. "Poverty, Income Inequality and Health," Treasury Working Paper Series 01/29, New Zealand Treasury.

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