Forthcoming, Canadian Journal of Economics Further Results on Measuring the Well-Being of the Poor Using Income and Consumption*

We evaluate the relative merits of income and consumption based measures of well-being. Our results provide evidence that consumption better captures wellbeing for those with few resources. The bottom deciles of expenditures exceed those of income, suggesting under-reporting of income. The under-reporting rate for government transfers is high and rising. Overall nonresponse is more severe in U.S. income data than in expenditure data. Furthermore, a consumption dataset requires fewer observations than an income dataset to obtain the same level of precision for typical estimates. Finally, very low consumption is more strongly related to other bad outcomes than very low income. *We thank Kerwin Charles, Thomas Crossley, Sheldon Danziger, Kara Kane, and Paula Worthington for extremely helpful comments. We also thank Wallace Mok for excellent research assistance. Meyer: Harris School of Public Policy Studies, University of Chicago, 1155 E. 60th Street, Chicago, IL 60637 [email protected] Sullivan: University of Notre Dame, Department of Economics, 447 Flanner Hall, Notre Dame, IN 46556 [email protected]