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

TitleConsumption and Economic Well-Being at Older Ages: Income- and Consumption-Based Poverty Measures in the HRS
Publication TypeReport
Year of Publication2006
AuthorsHurd, MD, Rohwedder, S
Series TitleRAND Working Paper
Document NumberWR-410
InstitutionRAND Corporation
CitySanta Monica, CA
Call Numberwp_2006/MRRCwp110.pdf
KeywordsConsumption and Savings, Health Conditions and Status, Income, Methodology
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.

DOI10.7249/WR410
Endnote Keywords

Consumption/Methods/Well Being/Income/Poverty

Endnote ID

15480

Citation Key5645