IDEAS home Printed from https://ideas.repec.org/p/mrr/papers/wp110.html
   My bibliography  Save this paper

Consumption and Economic Well-Being at Older Ages: Income- and Consumption-Based Poverty Measures in the HRS

Author

Listed:
  • Michael Hurd

    (RAND and NBER)

  • Susann Rohwedder

    (RAND)

Abstract

According to economic theory, well-being or utility depends on consumption. However, at the household level, total consumption is rarely well measured because its collection requires a great deal of survey time. As a result income has been widely used to assess well-being and poverty rates. Yet, because households can use wealth to consume more than income, so an income-based measure of well-being could yield misleading results for many households. We use data from the Health and Retirement Study to find income-based poverty rates which we compare with poverty rates as measured in the Current Population Survey. We use HRS consumption data to calculate a consumption-based poverty rate and study the relationship between income-based and consumption-based poverty measures. We find that a poverty rate based on consumption is lower than an income-based poverty rate. Particularly noteworthy is the much lower rate among the oldest single persons such as widows. The explanation for the difference is the ability to consume out of wealth.

Suggested Citation

  • Michael Hurd & Susann Rohwedder, 2006. "Consumption and Economic Well-Being at Older Ages: Income- and Consumption-Based Poverty Measures in the HRS," Working Papers wp110, University of Michigan, Michigan Retirement Research Center.
    • Handle: RePEc:mrr:papers:wp110
    as

    Download full text from publisher

    File URL: http://mrdrc.isr.umich.edu/publications/Papers/pdf/wp110.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jesus Fernández-Villaverde & Dirk Krueger, 2007. "Consumption over the Life Cycle: Facts from Consumer Expenditure Survey Data," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 552-565, August.
    2. Bruce D. Meyer & James X. Sullivan, 2003. "Measuring the Well-Being of the Poor Using Income and Consumption," NBER Working Papers 9760, National Bureau of Economic Research, Inc.
    3. Thesia I. Garner & Kathleen Short, 2005. "Economic Well-Being Based on Income, Consumer Expenditures and Personal Assessments of Minimal Needs," Working Papers 381, U.S. Bureau of Labor Statistics.
    4. Slesnick,Daniel T., 2001. "Consumption and Social Welfare," Cambridge Books, Cambridge University Press, number 9780521497206, January.
    5. Short, Kathleen, et al, 1998. "Poverty-Measurement Research Using the Consumer Expenditure Survey and the Survey of Income and Program Participation," American Economic Review, American Economic Association, vol. 88(2), pages 352-356, May.
    6. Dale W. Jorgenson, 1998. "Did We Lose the War on Poverty?," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 79-96, Winter.
    7. Jorgenson, Dale W & Slesnick, Daniel T, 1987. "Aggregate Consumer Behavior and Household Equivalence Scales," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 219-232, April.
    8. Peter Saunders, 1997. "Poverty, Choice and Legitimacy," Discussion Papers 0076, University of New South Wales, Social Policy Research Centre.
    9. Michael Hurd & F. Thomas Juster & James P. Smith, 2003. "Enhancing the Quality of Data on Income: Recent Innovations from the HRS," Journal of Human Resources, University of Wisconsin Press, vol. 38(3).
    10. Slesnick, Daniel T, 1994. "Consumption, Needs and Inequality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 677-703, August.
    11. John Sabelhaus & Jeffrey A. Groen, 2000. "Can Permanent-Income Theory Explain Cross-Sectional Consumption Patterns?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 431-438, August.
    12. 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.
    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. Guilherme Fonseca Travassos & Alexandre Bragança Coelho & Mary Paula Arends-Kuenning, 2022. "Poverty Among The Elderly: An Application of a Collective Consumption Model in Brazil," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 163(2), pages 925-951, September.
    2. Klasen, Stephan & Villalobos, Carlos, 2020. "Diverging identification of the poor: A non-random process. Chile 1992–2017," World Development, Elsevier, vol. 130(C).
    3. Flood, Lennart & Klevmarken, N. Anders & Mitrut, Andreea, 2006. "The Income of the Swedish Baby Boomers," IZA Discussion Papers 2354, Institute of Labor Economics (IZA).
    4. Yoko Niimi & Charles Yuji Horioka, 2023. "Elderly poverty and its measurement," Chapters, in: Jacques Silber (ed.), Research Handbook on Measuring Poverty and Deprivation, chapter 29, pages 307-315, Edward Elgar Publishing.
    5. Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2012. "Economic well-being and poverty among the elderly: An analysis based on a collective consumption model," European Economic Review, Elsevier, vol. 56(6), pages 985-1000.
    6. Michael D. Hurd & Susann Rohwedder, 2010. "The Effects of the Economic Crisis on the Older Population," Working Papers wp231, University of Michigan, Michigan Retirement Research Center.
    7. Giulia Bettin & Claudia Pigini & Alberto Zazzaro, 2020. "Financial Inclusion and Poverty Transitions: An Empirical Analysis for Italy," CSEF Working Papers 577, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    8. Hoffmann, Rasmus, 2011. "Socioeconomic inequalities in old-age mortality: A comparison of Denmark and the USA," Social Science & Medicine, Elsevier, vol. 72(12), pages 1986-1992, June.
    9. Jurgen Faik & Uwe Fachinger, 2013. "The decomposition of well-being categories: An application to Germany," Working Papers 307, ECINEQ, Society for the Study of Economic Inequality.
    10. Jones, Carol Adaire & Milkove, Daniel & Paszkiewicz, Laura, 2010. "Farm Household Well-Being: Comparing Consumption- and Income-Based Measures," Economic Research Report 58299, United States Department of Agriculture, Economic Research Service.
    11. Christopher House & John Laitner & Dmitriy Stolyarov, 2006. "Home Production by Dual Earner Couples and Consumption During Retirement," Working Papers wp143, University of Michigan, Michigan Retirement Research Center.

    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. Michael D. Hurd & Susann Rohwedder, 2006. "Economic Well-Being at Older Ages: Income- and Consumption-Based Poverty Measures in the HRS," NBER Working Papers 12680, National Bureau of Economic Research, Inc.
    2. Michael D. Hurd & Susann Rohwedder, 2006. "Economic Well-Being at Older Ages: Income- and Consumption-Based Poverty Measures in the HRS," NBER Working Papers 12680, National Bureau of Economic Research, Inc.
    3. Jones, Carol Adaire & Milkove, Daniel & Paszkiewicz, Laura, 2009. "Measuring Farm Household Well-Being: Comparing Consumption and Income-based Measures," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49355, Agricultural and Applied Economics Association.
    4. Yanfeng Chen & Qingjie Xia & Xiaolin Wang, 2021. "Consumption and Income Poverty in Rural China: 1995–2018," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 29(4), pages 63-88, July.
    5. Jones, Carol Adaire & Milkove, Daniel & Paszkiewicz, Laura, 2010. "Farm Household Well-Being: Comparing Consumption- and Income-Based Measures," Economic Research Report 58299, United States Department of Agriculture, Economic Research Service.
    6. Dirk Krueger & Fabrizio Perri, 2004. "On the Welfare Consequences of the Increase in Inequality in the United States," NBER Chapters, in: NBER Macroeconomics Annual 2003, Volume 18, pages 83-138, National Bureau of Economic Research, Inc.
    7. 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/Revue canadienne d'économique, John Wiley & Sons, vol. 44(1), pages 52-87, February.
    8. Han, Jeehoon & Meyer, Bruce D. & Sullivan, James X., 2020. "Inequality in the joint distribution of consumption and time use," Journal of Public Economics, Elsevier, vol. 191(C).
    9. Mike Brewer & Ben Etheridge & Cormac O’Dea, 2017. "Why are Households that Report the Lowest Incomes So Well‐off?," Economic Journal, Royal Economic Society, vol. 127(605), pages 24-49, October.
    10. John Sabelhaus & David Johnson & Stephen Ash & David Swanson & Thesia I. Garner & John Greenlees & Steve Henderson, 2014. "Is the Consumer Expenditure Survey Representative by Income?," NBER Chapters, in: Improving the Measurement of Consumer Expenditures, pages 241-262, National Bureau of Economic Research, Inc.
    11. Bruce D. Meyer & James X. Sullivan, 2017. "Consumption and Income Inequality in the U.S. Since the 1960s," NBER Working Papers 23655, National Bureau of Economic Research, Inc.
    12. repec:esx:essedp:736 is not listed on IDEAS
    13. Burtless Gary & Svaton Pavel, 2010. "Health Care, Health Insurance, and the Distribution of American Incomes," Forum for Health Economics & Policy, De Gruyter, vol. 13(1), pages 1-41, February.
    14. Mykerezi, Elton & Mills, Bradford F., 2009. "On Intra-Annual Poverty in the U.S.: Prevalence, Causes and Response to Food Stamp Program Use," Staff Papers 49095, University of Minnesota, Department of Applied Economics.
    15. Klasen, Stephan & Villalobos, Carlos, 2020. "Diverging identification of the poor: A non-random process. Chile 1992–2017," World Development, Elsevier, vol. 130(C).
    16. Nicolai Suppa, 2016. "Comparing Monetary and Multidimensional Poverty in Germany," OPHI Working Papers ophiwp103_1.pdf, Queen Elizabeth House, University of Oxford.
    17. Bruce D. Meyer & James X. Sullivan, 2011. "Consumption and Income Poverty Over the Business Cycle," Research in Labor Economics, in: Who Loses in the Downturn? Economic Crisis, Employment and Income Distribution, pages 51-82, Emerald Group Publishing Limited.
    18. Asena Caner & Ed Wolff, 2002. "Asset Poverty in the United States, 1984-1999: Evidence from the Panel Study of Income Dynamics," Microeconomics 0209002, University Library of Munich, Germany.
    19. Urvashi Dhawan-Biswal, 2002. "Consumption and Income Inequality: The Case of Atlantic Canada from 1969­1996," Canadian Public Policy, University of Toronto Press, vol. 28(4), pages 513-537, December.
    20. Mark Aguiar & Mark Bils, 2015. "Has Consumption Inequality Mirrored Income Inequality?," American Economic Review, American Economic Association, vol. 105(9), pages 2725-2756, September.
    21. Hung-Hao Chang, 2012. "Consumption inequality between farm and nonfarm households in Taiwan: a decomposition analysis of differences in distribution," Agricultural Economics, International Association of Agricultural Economists, vol. 43(5), pages 487-498, September.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:mrr:papers:wp110. 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: MRRC Administrator (email available below). General contact details of provider: https://edirc.repec.org/data/isumius.html .

    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.