Consumption inequality in Canada, 1997 to 2009

We assess the evolution of consumption inequality in Canada over the years 1997 to 2009. We correct the imputation of shelter consumption for homeowners to allow for unobserved differences in housing quality correlated with selection into rental tenure, and we account for measurement error in this imputation. Using the annual Survey of Household Spending for years 1997 to 2009, we find that household‐level consumption inequality measured by the Gini coefficient increased from 0.251 to 0.275 over 1997 to 2006. Between 2006 and 2007, consumption inequality may have decreased, and over 2007 to 2009, consumption inequality was flat. Over the entire period of 1997 to 2009, consumption inequality increased moderately. The Gini coefficient for individual‐level consumption inequality followed a similar pattern, though the changes were smaller in magnitude. We also explore a possible correction for tail non‐response bias in inequality measurement and find that the increase in measured consumption inequality is robust to this correction.     

Minimum Wage: Does it Improve Welfare in Thailand?

We study the causal impact of the minimum wage on labor market outcomes, household consumption, inequality and poverty in Thailand by relying on policy variation in minimum wages over time across provinces. We find that minimum‐wage increases have a large and significant impact on the likelihood of working in the uncovered sector among workers with elementary education. However, the impact is very small and insignificant among other labor market groups. In contrast, the minimum wage has large positive effects on the formal sector wages of low‐earning workers, such as the young, elderly and low educated. Increases in the minimum wage are associated with reductions in household poverty and consumption inequality at the bottom half of the distribution.     

Consumption smoothing in Russia1

Using a panel from the Russian Longitudinal Monitoring Survey (1994–2004), this paper investigates to what extent Russian households have been able to maintain their living standards while suffering income shocks. Consumption smoothing is modelled by means of an equilibrium correction mechanism, which disentangles short‐run dynamics and long‐run equilibrium adjustments. GMM estimation is used to control for individual household effects in the presence of dynamics. Additionally, we differentiate between food and non‐food consumption, positive and negative shocks, rural and urban areas, and several levels of poverty risk. We find that dynamics are important in the consumption equation, and that estimates are sensitive to imputation errors in home food production. No strong claims can be made regarding heterogeneity in smoothing behaviour.     

Economic well-being and poverty among the elderly: An analysis based on a collective consumption model

We apply the collective consumption model of Browning et al. (2010) to analyse economic well-being and poverty among the elderly. The model focuses on individual preferences, a consumption technology that captures the economies of scale of living in a couple, and a sharing rule that governs the intra-household allocation of resources. The model is applied to a time series of Dutch consumption expenditure surveys. Our empirical results indicate substantial economies of scale and a wife's share that is increasing in total expenditures. We further calculated two sets of poverty rates: one based on the collective consumption model and one based on the traditional approach with a standard equivalence scale. Poverty among widowers is underestimated by the traditional approach. The same is true for women (men) in elderly couples for the first (later) time periods in our analysis. Finally, we analysed the impact of becoming a widow(er). Based on cross-sectional evidence, we find that the drop in material well-being following the husband's death is rather substantial for women. For men, the picture is reversed.     

Methods of household consumption measurement through surveys: Experimental results from Tanzania

Surveys of consumption expenditure vary widely across many dimensions, including the level of reporting, the length of the reference period, and the degree of commodity detail. These variations occur both across countries and also over time within countries, with little current understanding of the implications of such changes for spatially and temporally consistent measurement of household consumption and poverty. A field experiment in Tanzania tests eight alternative methods of measuring household consumption, finding significant differences between consumption reported by the benchmark personal diary and other diary and recall formats. Under-reporting is particularly apparent for illiterate households and for urban respondents completing household diaries; recall modules measure lower consumption than a personal diary, with larger gaps among poorer households and for households with more adult members. Variations in reporting accuracy by household characteristics are also discussed and differences in measured poverty as a result of survey design are explored.     

MEASURING INEQUALITIES: DO HOUSEHOLD SURVEYS PAINT A REALISTIC PICTURE?

The paper addresses the issue of the accuracy of standard‐of‐living measurements using household survey data. First, it highlights the fact that lighter data collection processes in some developing countries have added to measurement errors in consumption and income aggregates measurement errors. The paper reasserts the need to apply reference guidelines to the measurement of household consumption in order to compute comparable distribution indicators across countries and over time. Second, it contends that it is hard to analyze inequality solely from consumption patterns without taking income and savings into account. Two solutions are proposed for the correction of income measurement errors: by using savings declarations and by implementing a multiple imputation procedure. The results are based on a careful analysis of the EPM93 survey of Madagascar whose design is quite close to the LSMS household surveys, and the ENV98 survey of Côte d'Ivoire representative of surveys conducted nowadays in most Sub‐Saharan African countries.     

Testing Prediction Performance of Poverty Models: Empirical Evidence from Uganda

This paper examines the performance of a method of predicting poverty rates. Because most developing countries cannot justify the expense of frequent household budget surveys, additional low‐cost methods have been developed and used. The prediction method is based on a model linking the proportion of poor households to suitable explanatory variables (consumption proxies). These consumption proxies are variables that can be collected at much lower cost through smaller annual surveys. Several applications have shown that such models can produce poverty estimates with confidence intervals of a similar magnitude to the poverty estimates from the household budget surveys. There is, however, limited evidence of how well the methods perform out‐of‐sample. A series of seven household budget surveys conducted in Uganda in the period 1993–2005 allows us to test the prediction performance of the model. We test the poverty models by using data from one survey to predict the proportion of poor households in other surveys, and vice versa. The results are encouraging, as all models predict similar poverty trends. Although in most cases the predictions are precise, sometimes they differ significantly from the poverty level estimated from the survey directly.     

The Hunger of Old Women in Rural Tanzania: Can Subjective Data Improve Poverty Measurement?

On average, women in Tanzania are slightly less likely than men to say that they are “always/often without enough food to eat”—but this masks a much higher rate of self‐reported food deprivation among elderly rural women. Official Tanzanian poverty statistics are, however, based on a methodology which presumes equal sharing per equivalent adult within the household. This paper combines subjective and objective micro‐data from Tanzania's 2007 Household Budget Survey and 2007 Views of the People Survey. By imputing individual consumption based on the relative probability of self‐reported food deprivation, it provides an example of the possible importance of one type of intra‐household inequality—i.e., the hunger of old women—for poverty measurement. Implications include the complexity of gendered intra‐household inequality and the importance of “technical” poverty measurement choices for public policy priorities, such as old age pensions.     

Domestic technology,consumption economies of scale and poverty: evidence from Sri Lanka

While it is well known that new technologies enhance consumer welfare, the manner in which these technologies impact the ability to realize economies of scale in consumption is not well understood. We use Sri Lankan household data to examine how the adoption of new technologies by households positively impacts their ability to achieve household economies of scale. This suggests that new technologies not only deliver a greater variety of consumption goods to consumers, but they may also play an important role in enabling large households to escape poverty by lowering the per-capita costs of maintaining a given standard of living. Given the importance of consumption economies of scale in the measurement of poverty, this study provides some insights on the extent to which the number of poor households changes when food consumption scale economies due to technology adoption in the domestic sphere are incorporated.     

Is there a link between alcohol consumption and the level of poverty?

In many developing countries, in addition to household income, there are a number of other socio-economic determinants of poverty. One such hidden socio-economic factor is alcohol consumption and some studies argue that there is a link between alcohol consumption and poverty. The main aim of this study is to measure the effects of alcohol consumption on the level of poverty in a systematic way. Using Sri Lanka as a case study, this article demonstrates that the consumption of various types of alcoholic beverages, particularly, the illegal beverages, has a significant positive association with the level of poverty. The findings of this study suggest that, in Sri Lanka, the consumption of illegal alcoholic beverages increases the likelihood of being in a poor household by 2–3%. The results of this study also find that households who are characterized as nonpoor but are just above the poverty line behave more like the poor rather than the nonpoor in terms of alcohol consumption. Some of the conclusions from this Sri Lankan case study can be applied to other developing countries.     

CALCULATING A PRICE INDEX FOR FAMILIES WITH CHILDREN: IMPLICATIONS FOR MEASURING TRENDS IN CHILD POVERTY RATES

This paper investigates the effects of varying consumption patterns for families with and without children on measured trends in child poverty. We first use data from consumer expenditure surveys to calculate price indices by family type. We next examine the effect of using these group-specific price indices on measured trends in child poverty. Although we find that, all else equal, children increase the cost of living, our calculations indicate that on average families with children experienced relatively lower inflation rates than families without children during the 1968 to 1987 period. While this result suggests that estimates of child poverty rates calculated using an average price index may have over-stated secular increases in child poverty, we find that child poverty rates calculated using a price index specific lo families with children are not substantively different from those calculated using an average index for all families.     

Poverty Dynamics,Violent Conflict,and Convergence in Rwanda

This paper analyzes the poverty impact of the violent events that affected Rwanda in the 1990s. The main objective of the paper is to identify systematically potential mechanisms linking violent conflict with changes in poverty across provinces and households in Rwanda before and after a decade of violence. In accordance with emerging literature on the long‐term economic effects of violent conflict, we find empirical evidence for economic convergence between richer and poorer Rwandan provinces and households following the conflict shocks. Using a small but unique panel of households surveyed before and after the conflict period, we find that households whose house was destroyed or who lost land ran a higher risk of falling into poverty. We do not find much evidence for an economic effect of violent deaths at the household level due to substitution effects of labor within the household. Non‐violent deaths however seem to increase income per adult equivalent for the survivors. Results are shown to be robust to sample selection and IV models.     

Wage,income and consumption inequality in Japan, 1981–2008: From boom to lost decades

In this paper we document the main features of the distributions of wages, earnings, consumption and wealth in Japan since the early 1980s using four main data sources: the Basic Survey on Wage Structure (BSWS), the Family Income and Expenditure Survey (FIES), the National Survey of Family Income and Expenditure (NSFIE) and the Japanese Panel Survey of Consumers (JPSC). We present an empirical analysis of inequality that specifically considers the path from individual wages and earnings, to household earnings, after-tax income, and finally consumption. We find that household earnings inequality rose substantially over this period. This rise is made up of two distinct episodes: from 1981 to 1996 all incomes rose, but they rose faster at higher percentiles; from 1996 to 2008 incomes above the 50th percentile remained flat but they fell at and below the 50th percentile. Inequality in disposable income and in consumption also rose over this period but to a lesser extent, suggesting taxes and transfers as well as insurance channels available to households helped to insulate household consumption from shocks to wages. We find the same pattern in inequality trends when we look over the life cycle of households as we do over time in the economy. Additionally we find that there are notable differences in the inequality trends for wages and hours between men and women over this period.     

Local elections and consumption insurance

During our sample period from 1987 to 2002, Chinese villages completed the transition from government‐appointed village leaders to elected ones. This article examines if and how much democratic elections of the village leaders affected consumption insurance by Chinese village residents. Exploring a panel dataset of 1,400 households from this period, we find that consumption insurance is around 20 percent more complete with elected village leaders. Furthermore, local elections improve consumption insurance only for the poor and middle‐income farmers, but not for the rich. The results are robust when we allow for pretrending, potential endogeneity of elections, and higher measurement errors for rich residents. We also find that the effects on consumption insurance are stronger when closer to the upcoming election year and when the village committees consist largely of non‐Communist Party members. These findings suggest that the election effects on consumption insurance partly come from increasing accountability to local constituents.     

Evaluating the performance of means-tested benefits in Bulgaria

Using household survey data and microsimulation techniques, we analyse the performance of three means-tested benefits in Bulgaria. We find that the transfers reach a small proportion of households with incomes below a relative poverty line, they have high non take-up rates, and large proportions of the recipients are neither poor nor entitled to receive the benefits. Unsurprisingly, although an important income source for poor households, the benefits have a very small impact on reducing the poverty rates. We show that our results are robust to potential underreporting of benefit receipt in the household survey. Finally, we analyse the effect of five reform scenarios, one of which fiscally neutral, on poverty and find that there is a large scope for policy improvement.     

Microdeterminants of consumption,poverty, growth,and inequality in Bangladesh

Using in a consistent way the household level data of five successive national surveys, this paper analyses at once the microdeterminants (and changes thereof) of consumption, poverty, growth, and inequality in Bangladesh from 1983 to 1996. Education, demographics, land ownership, occupation, and geographic location all affect consumption and poverty. The gains in per capita consumption associated with many of these household characteristics tend to be stable over time. Demographics have had the largest impact on growth. Education (in urban areas) and land (in rural areas) contribute the most to measures of conditional between group inequality, a new concept introduced in the paper to avoid the pitfalls of traditional group decompositions of the Gini index, followed by location in both sectors.     

Broadband adoption and content consumption

We explore how broadband access drives changes in the quantity and diversity of consumption of online content by using panel data that describes household Internet usage before and after broadband adoption. Our data suggests that on average, broadband adoption increases usage by over 1300 min per month. We also find that information consumption becomes more evenly distributed within the population, driven in part by post-adoption usage gains of almost 1800 min per month among individuals who were in the lowest usage quintile before adopting broadband. After adopting broadband, this pre-adoption lowest-usage quintile consumes content in greater quantities than users in neighboring quintiles, passing both the second and third quintiles in terms of absolute usage. This suggests that these users may have had strong preferences for high-bandwidth content that was too costly to consume in a narrowband environment. We also show that broadband adoption increases the variety of content that users consume although many of these gains appear to be associated with an increase in the variety of sites visited within previously visited content categories rather than an expansion in the types of content consumed.     

The impact of microcredit borrowing on household consumption in Bangladesh

ABSTRACT

The rapid expansion of microcredit in recent years renders knowledge of its impact on poverty critical. Unfortunately, empirical investigations have been limited by endogeneity issues, and randomized controlled trials suffer from a lack of power. This article suggests a strategy for handling the endogeneity of microcredit borrowing without specifying instrumental variables, allowing for estimation using observational data. The model is identified by an assumption on the conditional second moments of the errors and estimated semiparametrically. I find that an increase in the amount borrowed from the Grameen Bank and similar institutions in Bangladesh has a positive and significant effect on per-capita household consumption. The estimated elasticity is in the range of 0.18 to 0.21. These estimates indicate that microcredit may be more effective than previously thought.     

Income inequality, consumption, and social-status seeking

Using the Chinese Urban Household Survey data between 1997 and 2006, we find that income inequality has a negative (positive) effect on household consumption net of education expenditures (savings) even after we control for household income. We argue that people save to improve their social status when social status is associated with pecuniary and non-pecuniary benefits. Rising income inequality can strengthen the incentives of status-seeking savings by increasing the benefit of improving status, and by enlarging the wealth level required for status upgrading. We also find that the negative effect of income inequality on consumption is stronger for poorer and younger people and that income inequality stimulates more education investment, which are consistent with the status-seeking hypothesis.