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Welfare Measurement and Measurement Error

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  • Andrew Chesher
  • Christian Schluter

Abstract

The approximate effects of measurement error on a variety of measures of inequality and poverty are derived. They are shown to depend on the measurement error variance and functionals of the error-contaminated income distribution, but not on the form of the measurement error distribution, and to be accurate within a rich class of error-free income distributions and measurement error distributions. The functionals of the error-contaminated income distribution that approximate the measurement error induced distortions can be estimated. So it is possible to investigate the sensitivity of welfare measures to alternative amounts of measurement error and, when an estimate of the measurement error variance is available, to calculate corrected welfare measures. The methods are illustrated in an application using Indonesian household expenditure data. Copyright 2002, Wiley-Blackwell.

Suggested Citation

  • Andrew Chesher & Christian Schluter, 2002. "Welfare Measurement and Measurement Error," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 357-378.
  • Handle: RePEc:oup:restud:v:69:y:2002:i:2:p:357-378
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00209
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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