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The Validity of Consumption Data: Are the Consumer Expenditure Interview and Diary Surveys Informative?

In: Improving the Measurement of Consumer Expenditures

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  • Adam Bee
  • Bruce D. Meyer
  • James X. Sullivan

Abstract

This paper examines the quality of data collected in the Consumer Expenditure (CE) Survey, which is the source for the Consumer Price Index weights and is the main source of U.S. consumption microdata. We compare reported spending on a large number of categories of goods and services to comparable national income account data. We do this separately for the two components of the CE--the Interview Survey and the Diary Survey--rather than a combination that has been used in past comparisons. We find that most of the largest categories of consumption are measured well in the Interview Survey as the ratio to the national account data is close to one and has not declined appreciably over time. Several other large categories are reported at a low rate or have seen the ratio to the national accounts decline over time. The results are less encouraging for the Diary Survey. There is no large Diary category that is both measured well and reported at a higher rate than in the Interview Survey. We also compare the ownership of and the value of durables, such as homes and cars, in the CE to other sources. This evidence suggests the CE performs fairly well. Based on observable characteristics, the CE Survey appears to be fairly representative, although there is strong evidence of under-representation at the top of the income distribution and under-reporting of income and expenditures at the top. We then examine the precision of the two surveys and the frequency of no spending overall or for a given spending category. In the Diary Survey, we find much greater dispersion in spending and the dispersion relative to the Interview Survey varies across goods and over time. Diary respondents are much more likely to report zero spending for a consumption category, and a high and increasing fraction of respondents reporting zero for all categories. These results suggest that using Diary data to assess inequality trends and other distributional outcomes is likely to lead to biased and mislea
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Suggested Citation

  • Adam Bee & Bruce D. Meyer & James X. Sullivan, 2013. "The Validity of Consumption Data: Are the Consumer Expenditure Interview and Diary Surveys Informative?," NBER Chapters, in: Improving the Measurement of Consumer Expenditures, pages 204-240, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:12662
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    References listed on IDEAS

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    1. Martin Browning & Thomas F. Crossley & Guglielmo Weber, 2003. "Asking consumption questions in general purpose surveys," Economic Journal, Royal Economic Society, vol. 113(491), pages 540-567, November.
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    5. Michael D. Hurd & Susann Rohwedder, 2013. "Measuring Total Household Spending in a Monthly Internet Survey: Evidence from the American Life Panel," NBER Chapters, in: Improving the Measurement of Consumer Expenditures, pages 365-387, National Bureau of Economic Research, Inc.
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    8. Thomas F. Crossley & Joachim K. Winter, 2014. "Asking Households about Expenditures: What Have We Learned?," NBER Chapters, in: Improving the Measurement of Consumer Expenditures, pages 23-50, National Bureau of Economic Research, Inc.
    9. Bruce D. Meyer & James X. Sullivan, 2008. "Changes in the Consumption, Income, and Well-Being of Single Mother Headed Families," American Economic Review, American Economic Association, vol. 98(5), pages 2221-2241, December.
    10. Bruce D. Meyer & Wallace K. C. Mok & James X. Sullivan, 2009. "The Under-Reporting of Transfers in Household Surveys: Its Nature and Consequences," NBER Working Papers 15181, National Bureau of Economic Research, Inc.
    11. Bruce D. Meyer & James X. Sullivan, 2009. "Five Decades of Consumption and Income Poverty," Working Papers 0907, Harris School of Public Policy Studies, University of Chicago.
    12. Slesnick, Daniel T, 1992. "Aggregate Consumption and Saving in the Postwar United States," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 585-597, November.
    13. Bruce D. Meyer & James X. Sullivan, 2011. "Viewpoint: Further results on measuring the well-being of the poor using income and consumption," Canadian Journal of Economics, Canadian Economics Association, vol. 44(1), pages 52-87, February.
    14. Barry Bosworth, 2010. "Price Deflators, the Trust Fund Forecast, and Social Security Solvency," Working Papers, Center for Retirement Research at Boston College wp2010-11, Center for Retirement Research, revised Oct 2010.
    15. Naeem Ahmed & Matthew Brzozowski & Thomas Crossley, 2006. "Measurement errors in recall food consumption data," IFS Working Papers W06/21, Institute for Fiscal Studies.
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    Cited by:

    1. Fadlon, Itzik & Nielsen, Torben Heien, 2019. "Household labor supply and the gains from social insurance," Journal of Public Economics, Elsevier, vol. 171(C), pages 18-28.
    2. Kolsrud, Jonas & Landais, Camille & Spinnewijn, Johannes, 2017. "Studying Consumption Patterns using Registry Data: Lessons From Swedish Administrative Data," CEPR Discussion Papers 12402, C.E.P.R. Discussion Papers.
    3. Mark Aguiar & Erik Hurst, 2013. "Deconstructing Life Cycle Expenditure," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 437-492.
    4. Ingvild Almås & Timothy K.M. Beatty & Thomas F. Crossley, 2018. "Lost in Translation: What do Engel Curves Tell us about the Cost of Living?," CESifo Working Paper Series 6886, CESifo Group Munich.
    5. Bruce D. Meyer & James X. Sullivan, 2017. "Consumption and income inequality in the US since the 1960s," AEI Economics Working Papers 953873, American Enterprise Institute.
    6. William Passero & Thesia I. Garner & Clinton McCully, 2014. "Understanding the Relationship: CE Survey and PCE," NBER Chapters, in: Improving the Measurement of Consumer Expenditures, pages 181-203, National Bureau of Economic Research, Inc.
    7. James Banks & Richard Blundell & Peter Levell & James Smith, 2015. "Life-cycle consumption patterns at older ages in the US and the UK: can medical expenditures explain the difference?," IFS Working Papers W15/12, Institute for Fiscal Studies.
    8. Thomas F. Crossley & Joachim K. Winter, 2014. "Asking Households about Expenditures: What Have We Learned?," NBER Chapters, in: Improving the Measurement of Consumer Expenditures, pages 23-50, National Bureau of Economic Research, Inc.
    9. Campos, Rodolfo G. & Reggio, Iliana, 2014. "Measurement error in imputation procedures," Economics Letters, Elsevier, vol. 122(2), pages 197-202.
    10. Marta Lachowska, 2013. "Expenditure, Confidence, and Uncertainty: Identifying Shocks to Consumer Confidence Using Daily Data," Upjohn Working Papers and Journal Articles 13-197, W.E. Upjohn Institute for Employment Research.
    11. Mian, A. & Sufi, A., 2016. "Who Bears the Cost of Recessions? The Role of House Prices and Household Debt," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 255-296, Elsevier.
    12. Helen Levy & Thomas Buchmueller & Sayeh Nikpay, 2019. "The Impact of Medicaid Expansion on Household Consumption," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 45(1), pages 34-57, January.
    13. Zezza, Alberto & Carletto, Gero & Fiedler, John L & Gennari, Pietro & Jolliffe, Dean M, 2017. "Food Counts. Measuring Food Consumption And Expenditures In Household Consumption And Expenditure Surveys (HCES)," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 260886, European Association of Agricultural Economists.
    14. Bruce D. Meyer & Wallace K. C. Mok & James X. Sullivan, 2015. "Household Surveys in Crisis," Journal of Economic Perspectives, American Economic Association, vol. 29(4), pages 199-226, Fall.
    15. Coibion, Olivier & Gorodnichenko, Yuriy & Koustas, Dmitri, 2017. "Consumption Inequality and the Frequency of Purchases," IZA Discussion Papers 10882, Institute of Labor Economics (IZA).
    16. Erling Røed Larsen, 2014. "Is the Engel curve approach viable in the estimation of alternative PPPs?," Empirical Economics, Springer, vol. 47(3), pages 881-904, November.
    17. repec:pri:cheawb:slusky%202012%20federal%20parental%20insurance%20mandate%20vf is not listed on IDEAS

    More about this item

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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