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Measuring the Well-Being of the Poor Using Income and Consumption

  • Bruce D. Meyer
  • James X. Sullivan

We evaluate consumption and income measures of the material well-being of the poor. We begin with conceptual and pragmatic reasons that favor income or consumption. Then, we empirically examine the quality of standard data by studying measurement error and under-reporting, and by comparing micro-data from standard surveys to administrative micro-data and aggregates. We also compare low reports of income and consumption to other measures of hardship and well-being. The closer link between consumption and well-being and its better measurement favors the use of consumption when setting benefits and evaluating transfer programs. However, income retains its convenience for determining program eligibility.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9760.

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Date of creation: Jun 2003
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Publication status: published as Meyer, Bruce D and James X. Sullivan. "Measuring The Well-Being Of The Poor Using Income And Consumption," Journal of Human Resources, 2003, v38(Supplement), 1180-1220.
Handle: RePEc:nbr:nberwo:9760
Note: LS PE
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  1. V. J. Hotz & J. K. Scholz, . "Measuring Employment and Income for Low-Income Populations with Administrative and Survey Data," Institute for Research on Poverty Discussion Papers 1224-01, University of Wisconsin Institute for Research on Poverty.
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  3. Atkinson, Anthony B, 1991. "Comparing Poverty Rates Internationally: Lessons from Recent Studies in Developed Countries," World Bank Economic Review, World Bank Group, vol. 5(1), pages 3-21, January.
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  5. Richard Blundell & Luigi Pistaferri & Ian Preston, 2002. "Partial insurance, information and consumption dynamics," IFS Working Papers W02/16, Institute for Fiscal Studies.
  6. Christopher Bollinger & Martin H. David, 2000. "Estimation with Response Error and Non-Response: Food Stamp Participation in the SIPP," Econometric Society World Congress 2000 Contributed Papers 0198, Econometric Society.
  7. Bound, John & Brown, Charles & Mathiowetz, Nancy, 2001. "Measurement error in survey data," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 59, pages 3705-3843 Elsevier.
  8. Susan E. Mayer & Christopher Jencks, 1989. "Poverty and the Distribution of Material Hardship," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 88-114.
  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.
  10. John Bound & Alan B. Krueger, 1989. "The Extent of Measurement Error In Longitudinal Earnings Data: Do Two Wrongs Make A Right?," NBER Working Papers 2885, National Bureau of Economic Research, Inc.
  11. Skinner, Jonathan, 1987. "A superior measure of consumption from the panel study of income dynamics," Economics Letters, Elsevier, vol. 23(2), pages 213-216.
  12. Bound, John, et al, 1994. "Evidence on the Validity of Cross-Sectional and Longitudinal Labor Market Data," Journal of Labor Economics, University of Chicago Press, vol. 12(3), pages 345-68, July.
  13. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
  14. Richard Blundell & Ian Preston, 1997. "Consumption, inequality and income uncertainty," IFS Working Papers W97/15, Institute for Fiscal Studies.
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