CE Survey Data Users Forum

Patterns of HouseholOversp g endin

Sherman D. Hanna, Professor

Hua Zan, Ph.D. Student

The Ohio State University
Hanna background with CE data

 1973 quarterly expenditure interview data Wagner, J. & Hanna, S. (1983). The effectiv

family life cycle variables in consumer expenresearch. Journal of Consumer Research, 1281

-291.

 1990 CE Interview data from 1990, consume

that participated during all four quarters of 19al h d l t ti lso 

h

a

d comple

te reporting 

 Bae, M., Hanna, S. and Lindamood, S. (1993

Patterns of overspending in U.S. householdsPatterns of overspending in U.S. households

Financial Counseling and Planning, 4, 11-30
Overspending background Overspending background

 Chang (1994) found that 40% of house

experienced decrease in non-housing between 1983 and 1986 (SCF Panel between 1983 and 1986. (SCF Panel 

 Bae et al. (1993) of all households, ab

40% s

p ( ent more than income. 

(CE Int

dataset)

 Hanna & Yuh (2010) 15% reported tha

spent th i (SCF) t more than income (SCF)

 Charles et al. (2006): PSID vs CE vs S
Most recent research: Data and Sample

 Data Source:

Consumer Expenditure Survey (CE)

‐Interview Sur

2004

‐2005

 CE:

5 interviews interviews each year, a rotating rotating panel samp

samp

design

 Why use CE: comprehensive expenditure data an

imputed imputed income data (the imputation imputation started started in 2

 Sample:

 Si

x “ l” pane

s

”

o

f d t a

t

a creat de

d

b

y l i ump ng

t th oge er

consecutive quarters of data

 Only include consumer units who participate in fo

consecutive quarters to get 12 month expenditur

 Sample size: 6,113
Composition and Sample Sizes of Six P

Panel 1 Panel

2 Panel 3 Panel 4 Panel 5 P

2004 1

2 23334444

2005 1 1 1 1

2

2

2

2

333

4 4

2006

1

SampleSi 1,384 1,413 694 695 595 1Size 1,384 1,413 694 695 595 1

The first quarter data in 2005 used are from the fifth interview of 2004 CEX. The first quarter 2006 data used the fifth interview of 2005 CE, which were conducted in Jan., Feb, and Mar. of 2006.
Dependent Variables Dependent Variables

 Spending/income ratio : continuous continuous varia

varia

 Overspend: dichotomous variable variable

‘0’ if spending <= income‘

1’ if spending spending

> income

 Composition of spending of spending and income? income?
Spending and Income Spending and Income

 Spending: sum of quarterly outlays adjusted fo

expenditures on new vehicles

 Expenditures vs. outlays Adjustment Adjustment on new vehicle vehicle purchases: purchases: take

a strai

strai

depreciation of net outlays on new purchased but 

vehicles (assuming an average life expectancy of 1

 Income: after

‐tax income

–

pension contributio

 After

‐tax income=before

‐tax income – tax

 Before

‐tax income: wage and salary, nonfarm bus

supplemental security income, unemployment income, unemployment com

com

and etc.

 Pension contribution: social security contribution, 

pension contribution, and etc.

Spending and Income in 2004 adjusted to 2005

$
Independent Variables Independent Variables

 Race/ethnicity: Non

‐Hispanic White, Non

‐Hispanic Black, 

ot

her races.

 Age of the reference person, and age squared Family type: married, single

‐male headed, single

‐female h

other

f ili am es

 Education: less than high school, high school, some college

graduates or above.

 Presence Presence of

a child under age 19

 Homeowner Income N t e

t fi i l nancial asse

t

s

= sum

of t i i t f amoun

t in saving accoun

ts,

accounts, saving bonds, securities

+ other owed to the con

– non

‐mortgage debt

 Other monetary receipt receipt Region: Northeast, Midwest, South, West,

& rural

 Population size
Demographic Profile of the Sam

Demographic Profile of the Sam

Variables Means (std. dev.)

Income 56,2140 (2,067,039)Net financial assets 41,494 (8,256,915)Spending/income ratio 5.5Proportion overspending 42 6%.
Percentile of Spending/Income Ratio Percentile of Spending/Income Ratio

99% 8.9195% 2.5990% 1.8375% Q3 1.2650% Median 0.9225% Q1 0 68 .10% 0.515% 0 41 .1% 0.24
Comparison of 3 Analyses Comparison of

3 Analyses

CE SCF SCF p

2004-2005 Opinion

(1992-2007)

(

% di overspending 43 15 

Multivariate effect + + n

of age To age 47 To age 50-59

Education

+ NS n

Assets or net worth

+ ne

gative
Conclusions

 Intriguing patterns from CE data Intriguing patterns from CE data Could more easily compare to analyse

other datasets if had a few attitude var

 Overall assessment – spend more, sa

less than income (q ) SCF question)

 Is current income higher or lower than 

normal?

 Will income increase faster, slower, or 

the same as prices?
Questions About Using CE dataset Questions About Using CE dataset

 Not clear on weight variables Not clear on weight variables

– we use

we use

finlwt21 / 9

 Used mean of im

plicates for income

 But for hypothesis testing, probably sh

use RII method 

( g see Montalto & Sung

Financial Counseling and Planning, et
For future research For future research

 SCF has 

q yp uestion “Do 

you s

pend less 

income, about the same as income, or than income”

 O l 15% h d h i O

nly 15% say t

hey spen

d more t

han in

 Why big difference between the SCF 

perception and our finding from the perception and our finding from the

Consumer Expenditure Survey that alm43% overspend?

 Why positive effect of education with C

negative with SCF?