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Studying consumption with the Panel Study of Income Dynamics: comparisons with the Consumer Expenditure Survey and an application to the intergenerational transmission of well-being

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  • Kerwin Kofi Charles
  • Sheldon Danziger
  • Geng Li
  • Robert F. Schoeni

Abstract

Beginning in 1999, the Panel Study of Income Dynamics (PSID) added new questions about several categories of consumption expenditure. The PSID now covers items that constitute more than seventy percent of total expenditure measured in the Consumer Expenditure Survey (CE). We show that expenditure for each of the broad categories in the PSID aligns closely with corresponding measures from the CE. Using the new PSID data, we impute total expenditure in the PSID and show that this is also very close to total measured CE expenditure. For several distinct categories and for total consumption, we show that cross-sectional life cycle estimates of household expenditure activity are very similar across the two surveys. Finally, we illustrate the unique research value of the PSID for studying consumption by exploiting the survey's longitudinal design and genealogical structure to estimate the intergenerational elasticity of consumption expenditure, which is found to be in the range of 0.32-0.34.

Suggested Citation

  • Kerwin Kofi Charles & Sheldon Danziger & Geng Li & Robert F. Schoeni, 2006. "Studying consumption with the Panel Study of Income Dynamics: comparisons with the Consumer Expenditure Survey and an application to the intergenerational transmission of well-being," Finance and Economics Discussion Series 2007-16, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2007-16
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    References listed on IDEAS

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    1. Aughinbaugh, Alison, 2000. "Reapplication and extension: intergenerational mobility in the United States," Labour Economics, Elsevier, vol. 7(6), pages 785-796, November.
    2. F. Thomas Juster & James P. Smith, 2004. "Improving the Quality of Economic Data: Lessons from the HRS and AHEAD," Labor and Demography 0402010, EconWPA.
    3. Kerwin Kofi Charles & Erik Hurst, 2003. "The Correlation of Wealth across Generations," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1155-1182, December.
    4. Sean Becketti & William Gould & Lee Lillard & Finis Welch, 1985. "The Panel Study of Income Dynamics After Fourteen Years: An Evaluation," UCLA Economics Working Papers 361, UCLA Department of Economics.
    5. Fisher Jonathan D & Johnson David S, 2006. "Consumption Mobility in the United States: Evidence from Two Panel Data Sets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-38, September.
    6. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
    7. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-429, June.
    8. Becketti, Sean, et al, 1988. "The Panel Study of Income Dynamics after Fourteen Years: An Evaluatio n," Journal of Labor Economics, University of Chicago Press, vol. 6(4), pages 472-492, October.
    9. Skinner, Jonathan, 1987. "A superior measure of consumption from the panel study of income dynamics," Economics Letters, Elsevier, vol. 23(2), pages 213-216.
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    Cited by:

    1. Richard Bavier, 2008. "Reconciliation of income and consumption data in poverty measurement," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(1), pages 40-62.
    2. Guo, Sheng, 2010. "The superior measure of PSID consumption: An update," Economics Letters, Elsevier, vol. 108(3), pages 253-256, September.
    3. Erich Battistin & Mario Padula, 2016. "Survey instruments and the reports of consumption expenditures: evidence from the consumer expenditure surveys," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 179(2), pages 559-581, February.
    4. Geng Li, 2014. "Information Sharing and Stock Market Participation: Evidence from Extended Families," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 151-160, March.
    5. Daniel H. Cooper, 2010. "Imputing household spending in the Panel Study of Income Dynamics: a comparison of approaches," Working Papers 10-12, Federal Reserve Bank of Boston.

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    Keywords

    Consumption (Economics) ; Consumer surveys;

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