Skip to content

Research Paper University of Essex Department of Economics Discussion Paper Series 736

Why are households that report the lowest incomes so well-off?

Authors

Publication date

12 Apr 2013

Summary

Using data from the Living Costs and Food Survey in the UK over 1978-2009 we document that households with extremely low measured income (below 10% of median income) on average spend much more than those with merely moderately low income (those below 50% of median income): in short, the graph of median expenditure against income contains a sharp non-monotonicity (or `tick'). We show that this tick appears, to a greater or lesser extent, over the whole period and across different employment states, levels of education and marital statuses. Of the likely explanations, we provide several arguments that discount over-reporting of expenditure and argue that under-reporting of income plays the major role. In particular, by using a dynamic model of consumption and saving, and paying special attention to poverty dynamics, we show that consumption smoothing cannot explain all the apparent dissaving. Finally, and whatever the reason for the tick, we document that low consumption is better correlated with other measures of living standards than having low income.

ISSN

16

Subjects

Poverty, Living Standards, and Household Economics

Links

University of Essex Research Repository - http://repository.essex.ac.uk/8993/


Related publications

  1. Why are households that report the lowest incomes so well-off?

    Mike Brewer, Ben Etheridge, and Cormac O'Dea

    1. Poverty
    2. Living Standards
    3. Income Dynamics
    4. Household Economics
  2. Why are households that report the lowest incomes so well-off?

    Mike Brewer, Ben Etheridge, and Cormac O'Dea

#521983


Research home

Research home

News

Latest findings, new research

Publications search

Search all research by subject and author

Podcasts

Researchers discuss their findings and what they mean for society

Projects

Background and context, methods and data, aims and outputs

Events

Conferences, seminars and workshops

Survey methodology

Specialist research, practice and study

Taking the long view

ISER's annual report

Themes

Key research themes and areas of interest