Missing Consumption Inequality: Direct Evidence from Individual Food Data

Without data on individual consumption, inequality across individuals is almost invariably inferred by applying adult equivalence scales to household-level consumption data. To assess whether these household-based measures are effective, we exploit a rare opportunity in which individual food consumption data for each and all household members are available. We use a large sample of eight waves of the China Health and Nutrition Survey 1991-2011 that cover roughly 4,000 households and 11,000 individuals per wave. We find that adult-equivalent consumption misses 40% of the total cross-sectional individual inequality. The missing inequality is largely driven by the “vices" (i.e. alcohol, tobacco, coffee and tea) and by the core food consumption of young children. Our results suggest caution in the use of adult-equivalent scales to measure inequality, whose effectiveness depends on the items in the consumption basket and the presence of young children.