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

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

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 misleading results. Our results have important implications for interpreting and properly using CE data and how best to redesign the CE.

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File URL: http://www.nber.org/papers/w18308.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18308.

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Date of creation: Aug 2012
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Publication status: published as The Validity of Consumption Data: Are the Consumer Expenditure Interview and Diary Surveys Informative? , Adam Bee, Bruce D. Meyer, James X. Sullivan. in Improving the Measurement of Consumer Expenditures , Carroll, Crossley, and Sabelhaus. 2015
Handle: RePEc:nbr:nberwo:18308
Note: AG DAE EFG LS PE TWP
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  1. 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.
  2. Bruce Meyer & James X. Sullivan, 2010. "Five Decades of Consumption and Income Proverty," Working Papers 2010-003, Becker Friedman Institute for Research In Economics.
  3. 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.
  4. 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.
  5. 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.
  6. Melvin Stephens Jr., 2002. "'3rd of tha Month': Do Social Security Recipients Smooth Consumption Between Checks?," NBER Working Papers 9135, National Bureau of Economic Research, Inc.
  7. 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.
  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. 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 585-97, November.
  10. Naeem Ahmed & Matthew Brzozowski & Thomas Crossley, 2006. "Measurement errors in recall food consumption data," IFS Working Papers W06/21, Institute for Fiscal Studies.
  11. Jonathan A. Parker & Nicholas S. Souleles & David S. Johnson & Robert McClelland, 2013. "Consumer Spending and the Economic Stimulus Payments of 2008," American Economic Review, American Economic Association, vol. 103(6), pages 2530-53, October.
  12. Robert K. Triest, 1998. "Has Poverty Gotten Worse?," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 97-114, Winter.
  13. 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 2221-41, December.
  14. 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.
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