IDEAS home Printed from https://ideas.repec.org/a/ucp/ecdecc/v56y2007p163-189.html
   My bibliography  Save this article

Measurement Error Bias in Estimates of Income and Income Growth among the Poor: Analytical Results and a Correction Formula

Author

Listed:
  • Paul Glewwe

Abstract

In any population, income growth among the poor may be higher or lower than overall income growth. Estimates of income growth among the poor are almost always based on household surveys, but income and expenditure data in those surveys are almost always measured with error. This article uses the assumption that income follows a lognormal distribution to demonstrate that such measurement error can lead to biased estimates of the mean income of the poor and the growth of that mean income over time. In particular, when both income and the measurement error are lognormally distributed, (i) measurement error leads to underestimation of the mean income among the poor at any point in time, (ii) increases (decreases) in measurement error over time, for a given level of inequality, lead to underestimation (overestimation) of income growth among the poor, and (iii) increases (decreases) in inequality over time, for a given level of measurement error, lead to overestimation (underestimation) of income growth among the poor. This article derives a correction formula that calculates the mean income of the poor as a function of the mean of the observed income of the poor, the variance of observed (log) income, and the variance of the (log of) measurement error. This formula can then be used to calculate consistent estimates of income growth among the poor. This article also presents several simulations that relax the assumptions that measurement errors are lognormally distributed, have a mean of zero, and are uncorrelated with income. Relaxing these assumptions has little effect on the results, which implies that the derivations are robust to many different types of measurement error.

Suggested Citation

  • Paul Glewwe, 2007. "Measurement Error Bias in Estimates of Income and Income Growth among the Poor: Analytical Results and a Correction Formula," Economic Development and Cultural Change, University of Chicago Press, vol. 56(1), pages 163-189, October.
    • Handle: RePEc:ucp:ecdecc:v:56:y:2007:p:163-189
    DOI: 10.1086/520559
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/520559
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/520559?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. John Gibson & Jikun Huang & Scott Rozelle, 2003. "Improving Estimates of Inequality and Poverty from Urban China's Household Income and Expenditure Survey," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(1), pages 53-68, March.
    2. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198292975.
    3. Menno Pradhan, 2001. "Welfare Analysis with a Proxy Consumption Measure – Evidence from a Repeated Experiment in Indonesia," Tinbergen Institute Discussion Papers 01-092/2, Tinbergen Institute.
    4. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:dau:papers:123456789/5143 is not listed on IDEAS
    2. Dwayne Benjamin & Loren Brandt & Brian McCaig, 2017. "Growth with equity: income inequality in Vietnam, 2002–14," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 15(1), pages 25-46, March.
    3. Pina-Sánchez Jose & Koskinen Johan & Plewis Ian, 2019. "Adjusting for Measurement Error in Retrospectively Reported Work Histories: An Analysis Using Swedish Register Data," Journal of Official Statistics, Sciendo, vol. 35(1), pages 203-229, March.
    4. Paul Glewwe & Hai-Anh Hoang Dang, 2011. "Was Vietnam's Economic Growth in the 1990s Pro-Poor? An Analysis of Panel Data from Vietnam," Economic Development and Cultural Change, University of Chicago Press, vol. 59(3), pages 583-608.
    5. Filho, Irineu de Carvalho & Chamon, Marcos, 2012. "The myth of post-reform income stagnation: Evidence from Brazil and Mexico," Journal of Development Economics, Elsevier, vol. 97(2), pages 368-386.
    6. Charlotte Guénard & Sandrine Mesplé‐Somps, 2010. "Measuring Inequalities: Do Household Surveys Paint A Realistic Picture?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(3), pages 519-538, September.
    7. Pina-Sánchez, Jose & Buil-Gil, David & brunton-smith, ian & Cernat, Alexandru, 2021. "The impact of measurement error in models using police recorded crime rates," SocArXiv ydf4b, Center for Open Science.
    8. Shelley Clark & Caroline W. Kabiru & Sonia Laszlo & Stella Muthuri, 2019. "The Impact of Childcare on Poor Urban Women’s Economic Empowerment in Africa," Demography, Springer;Population Association of America (PAA), vol. 56(4), pages 1247-1272, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ada Ferrer-i-Carbonell & Bernard Van Praag, 2003. "Income Satisfaction Inequality and its Causes," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 1(2), pages 107-127, August.
    2. Vizard, Polly, 2005. "The contributions of Professor Amartya Sen in the field of human rights," LSE Research Online Documents on Economics 6273, London School of Economics and Political Science, LSE Library.
    3. Satya R. Chakravarty & Pietro Muliere, 2003. "Welfare indicators: A review and new perspectives. 1. Measurement of inequality," Metron - International Journal of Statistics, Dipartimento di Statistica, Probabilità e Statistiche Applicate - University of Rome, vol. 0(3), pages 457-497.
    4. Amartya K. Sen, 1997. "From Income Inequality to Economic Inequality," Southern Economic Journal, John Wiley & Sons, vol. 64(2), pages 384-401, October.
    5. Angus Deaton, 2003. "Health, Inequality, and Economic Development," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 113-158, March.
    6. Morton, Alec, 2014. "Aversion to health inequalities in healthcare prioritisation: A multicriteria optimisation perspective," Journal of Health Economics, Elsevier, vol. 36(C), pages 164-173.
    7. Markus Jäntti & Ravi Kanbur & Milla Nyyssölä & Jukka Pirttilä, 2014. "Poverty and Welfare Measurement on the Basis of Prospect Theory," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 182-205, March.
    8. White, Thomas J., 2007. "Sharing resources: The global distribution of the Ecological Footprint," Ecological Economics, Elsevier, vol. 64(2), pages 402-410, December.
    9. Nicolas Gravel & Patrick Moyes, 2011. "Bidimensional Inequalities with an Ordinal Variable," Studies in Choice and Welfare, in: Marc Fleurbaey & Maurice Salles & John A. Weymark (ed.), Social Ethics and Normative Economics, pages 101-127, Springer.
    10. Koen Decancq & María Ana Lugo, 2009. "Measuring inequality of well-being with a correlation-sensitive multidimensional Gini index," Working Papers 124, ECINEQ, Society for the Study of Economic Inequality.
    11. Sam Harper & Eric Ruder & Henry A. Roman & Amelia Geggel & Onyemaechi Nweke & Devon Payne-Sturges & Jonathan I. Levy, 2013. "Using Inequality Measures to Incorporate Environmental Justice into Regulatory Analyses," IJERPH, MDPI, vol. 10(9), pages 1-21, August.
    12. Claudio Zoli, 2002. "Inverse stochastic dominance, inequality measurement and Gini indices," Journal of Economics, Springer, vol. 77(1), pages 119-161, December.
    13. repec:hal:journl:dumas-00906152 is not listed on IDEAS
    14. Schlör, Holger & Fischer, Wolfgang & Hake, Jürgen-Friedrich, 2012. "Measuring social welfare, energy and inequality in Germany," Applied Energy, Elsevier, vol. 97(C), pages 135-142.
    15. Songtao Wang & Bin Li & Tristan Kenderdine, 2019. "Towards a Utilitarian Social Welfare Function¡ªIncome Inequality and National Welfare Growth in China," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 344-358, December.
    16. Claudio Zoli, 2012. "Characterizing Inequality Equivalence Criteria," Working Papers 32/2012, University of Verona, Department of Economics.
    17. Jean–Yves Duclos & Phillipe Grégoire, 2002. "Absolute and Relative Deprivation and the Measurement of Poverty," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(4), pages 471-492, December.
    18. Akli Berri, 2009. "Transport consumption inequalities and redistributive effects of taxes: A repeated cross-sectional evaluation on French household data," Working Papers 145, ECINEQ, Society for the Study of Economic Inequality.
    19. Jean-Yves Duclos & Paul Makdissi, 2007. "Restricted Inequality and Relative Poverty," Research on Economic Inequality, in: Inequality and Poverty, pages 255-280, Emerald Group Publishing Limited.
    20. Stephen P. Jenkins & John Micklewright, 2007. "New Directions in the Analysis of Inequality and Poverty," Discussion Papers of DIW Berlin 700, DIW Berlin, German Institute for Economic Research.
    21. Remuzgo, Lorena & Sarabia, José María, 2013. "Desigualdad en la distribución mundial de emisiones de CO2 por sectores: Descomposición y estudio de sensibilidad/Inequality of Global Distribution of CO2 Emissions by Sector: Decomposition and Sensit," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 31, pages 65-92, Enero.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:ecdecc:v:56:y:2007:p:163-189. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/EDCC .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.