Data to Examine Consumption Poverty 

I lit i th U S 1960 Inequality in the 

U.S.: 1960

-2008

CE Surve

y Data Users’ Needs Forum 

June 22, 2010

Bruce D. MeyerUniversity of Chicago and NBERBased on work withJ X S lli James 

X. 

S

ullivan

University of Notre Dame
I. Introduction

 Question: How have poverty and ineq

changed over the past five decades? changed over the past five decades?

 We look at both income and consumption 

measures of well measures of well-being

 We emphasize the importance of measure

issues for understanding poverty and ineqpatterns

 We refine the methods to convert expendi

d t i t ti d t data into consumption data
I. Income v. Consumption: Concep

 Meyer and Sullivan (2003, 2007) C t l i f ti Concep

tual issues 

favor consumption.

 Permanent income (Cutler and Katz 1991

Poterba 1991) Poterba 1991)

 Public and private insurance Access to credit Access to credit
II. Income v. Consumption: Data Q

 Reporting issues are split between inco

consumption

 Ease of reporting v. sensitive topics Nonresponse Under-reporting

 Low percentiles of expenditures greatly 

Low percentiles of expenditures greatly 

low percentiles of income
Nonresponse Rates T bl 5

Survey Nonresponse Imputation Rates

T

able 

5

Survey Nonresponse and Imputations Rates, CPS and CE Interview 1993-2007

CPSASEC/ADF CE Survey CPS-ASEC/ADF 

Pre-tax 

Money 

Income

After-tax 

Income

a

After-tax 

Incomeb

Income Income 

a Incomeb 

(1) (2) (3) (4) (5) 

1993 0.154 0.156 0.153 0.252 0.444 1994 0.154 0.167 0.156 0.259 0.456 

1995 0 154 . 0 194 . 0 180 . 0 295 . 0 496 . 1996 0.157 0.211 0.190 0.316 0.518 1997 0.144 0.199 0.204 0.344 0.548 1998 0.161 0.201 0.219 0.375 0.574 1999 0.144 0.202 0.217 0.382 0.589 2000 0.159 0.200 0.248 0.428 0.626 2001 0.162 0.220 0.255 0.434 0.628 2002 0.150 0.220 0.262 0.422 0.604 2003 0.160 0.214 0.254 0.389 0.565 2004 0.174 0.240 0.256 0.401 0.583 2005 0.167 0.255 0.239 0.373 0.557 2006 0.171 0.234 0.252 0.403 0.592 2007 0.156 0.262 0.251 0.398 0.591 
Share of Dollars Imputed, CPS

0 4.0.30.20.1

AFDC/TANF Food StampOASDI SSI

0

123456789012345

UI WC

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Meyer, Mok, and Sullivan (2009)
Reporting Rates for Dollar Amounts of Transfer Programs

1

0 60.80 40.60.20.4

AFDC/TANF Food Stamps 

0

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999
Ratios of CE Expenditure Measures to National Aggregates 1980-2008

1.11.2 Food at home 

Rent plus Utilities Alcoholic beverages Tobacco 

Ratios of CE Expenditure Measures to National Aggregates, 1980 2008

0.80.9

1

o

0.60.7

CE/NIPA Rati

0 30.40.50.10.20.3

1980 1984 1987 1992 1994 1997 2002 2004 
II. Income v. Consumption: Data Q

 Refinement to income tend to move it t

consumption (alternative poverty housconsumption (alternative poverty, hous

MOOP, etc.)

 CE provides much info to approximate CE provides much info to approximate

consumption that is missing in CPS (ho

and vehicle characteristics MOOP) and vehicle characteristics, MOOP). 

 Consumption is more strongly associa

other measures of well other measures of well

-being
II. CPS Income Data

 Current Population Survey – ASEC/AD

 1963

-2008

 Taxes calculated using TAXSIM Census has imputed noncash benefits sin

Census has imputed noncash benefits sin

 These imputed benefits have some drawb
III. CE Consumption and Income 

 Consumer Expenditure (CE) Interview 

Component

 1960/61, 1972/73, 1980-1981, 1984-2008 1982

-1983 only urban consumers; also be

1983 only urban consumers; also be

summary measures of aggregated expenare not provided it makes it difficult to use

 Recent improved timeliness of data releas

welcome; talk of speeding up releases fur
III. CE Consumption and Income 

 Consumer Expenditure (CE) Interview 

Component raw data Component raw data

 Mostly use family files: summary expendit Also use detailed expenditure files: vehicle

Also use detailed expenditure files: vehicle

Medicaid enrollment, HI coverage

 And member files: exact age composition 

And member files: exact age composition 
III. CE Consumption Data

 We modify expenditures to approach consum

 We make many improvements in the measureme

We make many improvements in the measureme

consumption at the bottom

 Rental equivalent for owner-occupied housing 

 W h k d th t it l t ibl t t d h 

We c

hec

k

e

d th

a

t it rela

tes sensibly 

to repor

t

e

d

hom

 Others have related reported home values to sales 

other datasets.

 Impute value of public/subsidized housing using d

housing characteristics

 Make adj q ustment based on PSID info on rental e

qu

 Adding rental equivalent to survey would be helpful
III. CE Consumption Data

 Flow value of vehicles (based on more 

350,000 purchase prices) 350,000 purchase prices)

 Use equations to predict purchase price fo

without it

 Complicated set of regressions to determi

prices of vehicle characteristics depending information is missing. information is missing.

 Use data to determine depreciation that go

flow value

 Validated using NADA data Unfortunate that make but not model avail

beginning in 2006 beginning in 2006.
III. CE Consumption Data

 Medical care, health insurance

 Subtract out MOOP Imputed in CPS in p

Subtract out MOOP. Imputed in CPS in p

Supplemental Poverty Measure.

 Use information on Medicaid Medicare a

Use information on Medicaid, Medicare, a

HI coverage.
III. General Issues in CE 

 We use annualized quarterly data Wh d t tf 

We 

have compare

d one quar

ter 

to 

fou

there is some understatement of dispe

inherent in relying on one quarter inherent in relying on one quarter.

 This problem is likely to be much more 

if one relies on two weeks of expendituif one relies on two weeks of expenditu

infer consumption in the diary data.

 C i f k f di d t 

Comparisons o

f one wee

k o

f diary 

d

a

ta 

weeks shows differences in the distribu

expenditures. 
III. CE Income Data

 We use TAXSIM as reported income ta

payments are very different from estimpayments are very different from estim

taxes.

 NBER willing to supply code to implement 

NBER willing to supply code to implement 

 State IDs missing for 16 percent of the 

we used from the 1990s in our AER pawe used from the 1990s in our AER pa

 Imputation of income began in 2005.  C ld ili ti f i d Could reconcili

ation o

f income an

d

consumption be brought back?
Figure 1: Real After-tax Income Plus Food Stamps at Various Percentiles, 1980-2008, C

CE Survey

16000

5th Percentile CPS10th Percentile CPS25th Percentile CPS5th Percentile CE Survey 10th Percentile CE Survey 25th Percentile CE Survey

1200014000

25th Percentile CE Survey

8000

10000

2005 $

40006000

0

2000

80

82

84

86

88

90

92

94

96

98

00

02

198

198

198

198

198

199

199

199

199

199

200

200
Figrue 2: Real After-tax Income Plus Food Stamps at Various Percentiles, 1980-2008, C

CE Survey

70000

50th Percentile CPS75th Percentile CPS90th Percentile CPS50th P til CE S

5000060000

50th

Percentile CE

Surve

y

75th Percentile CE Survey90th Percentile CE Survey

3000040000

2005 $

20000

0

10000

80

82

84

86

88

90

92

94

96

98

00

02

198

198

198

198

198

199

199

199

199

199

200

200
VI. Core Consumption

 We look at a subset of total consumption tha

includes im

p p gg ortant s

pendin

g cate

gories that 

be well reported:

 Housing Food at home Food at home Transportation

 For those near the poverty line, Core is 80% 

medi l i i l 1980 dical consumption in early 1980

s

 Information is needed to compare CE totals 

aggregates Knowing which categories of aggregates. Knowing which categories of

expenditures line up well with NIPA would be helpful. An earlier Garner et al. paper did th

NIPA categories have changed NIPA categories have changed. 
VII. Predicted Consumption

 We regress total consumption measur

cubic in core consum

p 

tion, a cubic in t

of the head, education of the head dumfamily type dummies, and race dummie

 We use data from 1980 We use data from 1980

-81 because to

81, because to

expenditures in the CE Survey comparfavorably to NIPA in the early 1980s th

recent years.

 Coefficients from this regression are th

used to predict a value of the consumpused to predict

a value of the consump

measures for each consumer unit in al

 R-squared = 0.72
VIII. Results

 Do income and consumption poverty a

inequality differ? inequality differ?
Summary of Changes in Income and Consumption Ineq

0.3

0.25 Log After-Tax Income0.15

0.2

Ratio

Log Consumption Excluding HI

0.1

0.15

e in 90/10 R

0

0.05

Change

-0.05

1963-1972 1972-1980 1980-1990 1990-2000 

-0.1
Figure 4: Consumption Inequality 1961-2008

6 56.06.55.05.54.04.5

90/10 Ratio

3 03.5

After-tax Money Incom

2.53.0 After-tax Money Incom

Expenditures (90/10)Consumption (90/10)Consumption ExcludiCore Consumption (9

2.0

1

3

5

7

9

11

13

15

17

19

21

23

25

27

29

31

33

35

37
XI. Conclusions

 Consumption data extremely useful to 

measures of well measures of well

-being.

 Consumption poverty and inequality ar

different from their income cousins different from their income cousins. 
XI. Conclusions: Data Suggest

 Recent improvements helpful

 Imputation of income Improved timeliness of data release

 Opportunities for improvement

 Information on categories compatible with 

more regular comparisons to NIPA totals

 Suppression of vehicle model starting in 2

Suppression of vehicle model starting in 2

 High fraction of units with suppressed or re

state id

 Make data available at RDC? Use TAXSIM? Reconcile Y and Expenditures?

IX. Comparisons Across Data 

 How does consumption inequality in th

Survey compare to that in the PSID? Survey compare to that in the PSID?

 Food and housing

 How does income inequality in the CPS How does income inequality in the CP

compare to that in the PSID?

 Pre

-tax money income tax money income
Consumption Inequality, CPS and PSID 1980-2007

0 140 100.120.140.060.080.10

1980

0.020.040.06

n 90-10 Since 

-0.02

0.00

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

Change in

-0.06-0.04

Food at home & housing consumption (CE SurveFood at home & housing consumption (PSID)

-0.08
Pre-Tax Money Income Inequality, CPS and PSID 1967-2006

0 40.30.4

Pre-tax Money Income (CPS)Pre-tax Mone

y Income (PSID)

0.2

1980

y ()

0.1

n 90-10 Since 

0.0

967

969

971

973

975

977

979

981

983

985

987

989

991

993

995

997

999

Change in

-0.1

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

-0.2
September 6, 2007 | Issue 43•37

In The Know: Are America's Rich FallingBehind The Super-Rich?Panelists discuss a new study showingthe gap between the wealthy and the absurdlywealthy is widening, and how we can help themerely rich catch up merely rich catch up.
I. Introduction

 Some previous work has examined inc

and/or consumption poverty or inequaland/or consumption poverty or inequal

 P60 Series Reports (annual) Gottschalk and Danziger (2005) Gottschalk and Danziger (2005) Burkhauser et al. (various) Johnson Smeeding and Torrey (2005) Johnson, Smeeding, and Torrey (2005) Krueger and Perri (2006)  Heathcote Perri and Violante (2010) Heathcote, Perri, and Violante (2010) Attanasio, Battistin and Ichimura (2004)
0 25

Figure 2: Real Changes in Consumption at Various Percentiles, 1972-2008

0.200.25

5th Percentile Consumption Excluding HI10th Percentile Consumption Excluding HI90th Percentile Consumption Excluding HI

0.15

to 1980

90th Percentile Consumption Excluding HI25th Percentile Consumption Excluding HI50th Percentile Consumption Excluding HI75th Percentile Consumption Excluding HI

0.10

nce Relative t

0.000.05

246802468024680

Log Differen

-0.05

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

-0.10
Figure 5: Consumption Inequality 1961-2008

6 56.06.5

Consumption Excluding HI 

5.05.5 Consumption Excluding HI 

Predicted Consumption Exc

4.04.5

90/10 Ratio

3.03.52 02.52.0

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997