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Further Results on Measuring the Well-Being of the Poor Using Income and Consumption

  • Bruce D. Meyer
  • James X. Sullivan

In the U.S., analyses of poverty rates and the effects of anti-poverty programs rely almost exclusively on income data. In earlier work (Meyer and Sullivan, 2003) we emphasized that conceptual arguments generally favor using consumption data to measure the well-being of the poor, and, on balance, data quality issues favor consumption in the case of single mothers. Our earlier work did not show that income and consumption differ in practice. Here we further examine data quality issues and show that important conclusions about recent trends depend on whether one uses consumption or income. Changes in the distribution of resources for single mothers differ sharply in recent years depending on whether measured by income or consumption. Measures of overall and sub-group poverty also sharply differ. In addition to examining broader populations and a longer time period, we also consider new dimensions of data quality such as survey and item nonresponse, imputation, and precision. Finally, we demonstrate the flaws in a recent paper that compares income and consumption data.

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File URL: http://www.nber.org/papers/w13413.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13413.

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Date of creation: Sep 2007
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Publication status: published as Meyer, B. D. and Sullivan, J. X. (2011), Viewpoint: Further results on measuring the well-being of the poor using income and consumption. Canadian Journal of Economics/Revue canadienne d'économique, 44: 52–87. doi: 10.1111/j.1540-5982.2010.01623.x
Handle: RePEc:nbr:nberwo:13413
Note: LS PE
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  1. Martin Browning & Thomas F. Crossley & Guglielmo Weber, 2002. "Asking Consumption Questions in General Purpose Surveys," Social and Economic Dimensions of an Aging Population Research Papers 77, McMaster University.
  2. Bruce D. Meyer & Dan T. Rosenbaum, 1999. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers," NBER Working Papers 7363, National Bureau of Economic Research, Inc.
  3. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
  4. 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.
  5. Kasia O'Neill Murray & Wendell E. Primus, 2005. "Recent Data Trends Show Welfare Reform to Be a Mixed Success: Significant Policy Changes Should Accompany Reauthorization," Review of Policy Research, Policy Studies Organization, vol. 22(3), pages 301-324, 05.
  6. Jonathan Gruber, 1994. "The Consumption Smoothing Benefits of Unemployment Insurance," NBER Working Papers 4750, National Bureau of Economic Research, Inc.
  7. Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 163-193.
  8. Sawhill, Isabel V, 1988. "Poverty in the U.S.: Why Is It So Persistent?," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1073-119, September.
  9. David M. Cutler & Lawrence F. Katz, 1991. "Macroeconomic Performance and the Disadvantaged," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 1-74.
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