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Income, expenditure and the living standards of UK households

Author

Listed:
  • Richard Blundell

    (Institute for Fiscal Studies and University College London)

  • Ian Preston

    (Institute for Fiscal Studies and University College London)

Abstract
Despite the widespread use of income as a measure of household welfare, there is much to recommend the use of consumption. Indeed, standard economic arguments suggest that consumption expenditure will better reflect expected lifetime resources and many economists have been unequivocal in advocating its use. Slesnick (1993), for example, suggests that ‘From a theoretical perspective it is more appropriate to evaluate poverty using a consumption based measure of household welfare’. Cutler and Katz (1992) state that ‘Economic theory suggests that permanent income or consumption is a more accurate measure of the distribution of resources than is current income’. Poterba (1989) argues that `If households base their spending plans on their expected lifetime income, then consumption provides a more accurate measure of resources than does annual income’.

Suggested Citation

  • Richard Blundell & Ian Preston, 1995. "Income, expenditure and the living standards of UK households," Fiscal Studies, Institute for Fiscal Studies, vol. 16(3), pages 40-54, August.
    • Handle: RePEc:ifs:fistud:v:16:y:1995:i:3:p:40-54
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    File URL: http://www.ifs.org.uk/fs/articles/fsblundellandpreston.pdf
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    References listed on IDEAS

    as
    1. Poterba, James M, 1989. "Lifetime Incidence and the Distributional Burden of Excise Taxes," American Economic Review, American Economic Association, vol. 79(2), pages 325-330, May.
    2. Richard Blundell & Martin Browning & Costas Meghir, 1994. "Consumer Demand and the Life-Cycle Allocation of Household Expenditures," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(1), pages 57-80.
    3. Banks, James & Blundell, Richard & Preston, Ian, 1994. "Life-cycle expenditure allocations and the consumption costs of children," European Economic Review, Elsevier, vol. 38(7), pages 1391-1410, August.
    4. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    5. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-231, March.
    6. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    7. McClements, L. D., 1977. "Equivalence scales for children," Journal of Public Economics, Elsevier, vol. 8(2), pages 191-210, October.
    8. Slesnick, Daniel T, 1993. "Gaining Ground: Poverty in the Postwar United States," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 1-38, February.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Richard Blundell & Hamish Low & Ian Preston, 2013. "Decomposing changes in income risk using consumption data," Quantitative Economics, Econometric Society, vol. 4(1), pages 1-37, March.
    2. Pandey, Manoj K., 2008. "Association between marital status and health: examining the role of age and gender," MPRA Paper 15923, University Library of Munich, Germany.
    3. Lo, Kuang-Ta & Chou, Ta-Sheng & Tsui, Stephanie, 2020. "The asymmetric behavior of household consumption under the business cycle," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    4. Pandey, Manoj K., 2008. "Ageing, marital status and its health implications: evidences from India," MPRA Paper 15370, University Library of Munich, Germany.
    5. Brewer, Mike & O'Dea, Cormac, 2012. "Measuring living standards with income and consumption: evidence from the UK," ISER Working Paper Series 2012-05, Institute for Social and Economic Research.
    6. Francesco Olivanti, 2018. "Standard Budgets in Spanish Economic History: a User’s Guide to Sources and Methods," HHB Working Papers Series 10, The Historical Household Budgets Project.
    7. Koeniger, Winfried, 2001. "Labor and Financial Market Interactions: The Case of Labor Income Risk and Car Insurance in the UK 1969-95," IZA Discussion Papers 240, Institute of Labor Economics (IZA).
    8. R. Alessie & A.S. Kalwij, 2003. "Permanent and Transitory Wage Inequality of British Men, 1975-2001: Year, Age and Cohort Effects," Working Papers 03-04, Utrecht School of Economics.
    9. Esa Karonen & Mikko Niemelä, 2022. "Necessity-Rich, Leisure-Poor: The Long-Term Relationship Between Income Cohorts and Consumption Through Age-Period-Cohort Analysis," Journal of Family and Economic Issues, Springer, vol. 43(3), pages 599-620, September.
    10. Dickens, Richard, 1996. "The evolution of individual male earnings in Great Britain 1974-1994," LSE Research Online Documents on Economics 20647, London School of Economics and Political Science, LSE Library.
    11. Alissa Goodman & Steven Webb, 1995. "The distribution of UK household expenditure, 1979-92," Fiscal Studies, Institute for Fiscal Studies, vol. 16(3), pages 55-80, August.
    12. Ken Judge & Iain Paterson, 2001. "Poverty, Income Inequality and Health," Treasury Working Paper Series 01/29, New Zealand Treasury.
    13. Erich Battistin & Richard Blundell & Arthur Lewbel, 2009. "Why Is Consumption More Log Normal than Income? Gibrat's Law Revisited," Journal of Political Economy, University of Chicago Press, vol. 117(6), pages 1140-1154, December.
    14. Manoj K. Pandey, 2009. "Poverty and Disability among Indian Elderly: Evidence from Household Survey," ASARC Working Papers 2009-10, The Australian National University, Australia South Asia Research Centre.
    15. Sukyong Seo & Young Dae Kwon & Ki-Bong Yoo & Yejin Lee & Jin-Won Noh, 2019. "Is Transient and Persistent Poverty Harmful to Multimorbidity?: Model Testing Algorithms," IJERPH, MDPI, vol. 16(13), pages 1-11, July.
    16. Manoj K. Pandey, 2009. "On Ageing, Health and Poverty in Rural India," ASARC Working Papers 2009-14, The Australian National University, Australia South Asia Research Centre.
    17. Thomas F. Crossley & Krishna Pendakur, 2002. "Consumption Inequality," Department of Economics Working Papers 2002-09, McMaster University.
    18. Whitehouse, Edward, 2000. "How Poor are the Old? A Survey of Evidence from 44 Countries," MPRA Paper 14177, University Library of Munich, Germany.
    19. Mike Brewer & Cormac O'Dea, 2012. "Measuring living standards with income and consumption: evidence from the UK," IFS Working Papers W12/12, Institute for Fiscal Studies.
    20. Disney, Richard & Whitehouse, Edward, 2001. "Cross-country comparisons of pensioners’ incomes," MPRA Paper 16345, University Library of Munich, Germany.
    21. repec:aia:aiaswp:wp18 is not listed on IDEAS

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