Journal Article

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

Authors

Publication date

Oct 2017

Summary

We document that households in the UK with extremely low measured income tend to spend much more than those with merely moderately low income. This phenomenon is evident throughout three decades worth of microdata 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.

Published in

Economic Journal

Volume and page numbers

127 , 24 -49

DOI

http://dx.doi.org/10.1111/ecoj.12334

ISSN

16

Subjects

Poverty, Living Standards, Income Dynamics, and Household Economics

Notes

Open Access; © 2017 The Authors. The Economic Journal published by John Wiley & Sons Ltd on behalf of Royal Economic Society.; This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

Related publications

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

   Mike Brewer, Ben Etheridge, and Cormac O'Dea

   Research Paper, University of Essex Department of Economics Discussion Paper Series, 736 - 12 Apr 2013
   1. Poverty
   2. Living Standards
   3. Household Economics

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