NONCASH INCOME, EQUIVALENCE SCALES, AND THE MEASUREMENT OF ECONOMIC WELL-BEING

Little attention has been paid to the importance of consistency between the specifications of the income and the equivalence scales used in measuring economic well-being when noncash income is included in the definition of income. This article finds that inconsistency between the income and needs sides of a comparison can be important when some types of noncash income are included. An upward bias in the measured economic status of the aged when Medicare is included in income and an ordinary equivalence scale is used is presented as an example of the important effects of this consistency problem.