Why are Households that Report the Lowest Incomes So Well‐off?

Mike Brewer, Ben Etheridge and Cormac O’Dea
Authors registered in the RePEc Author Service: Cormac O'Dea

Economic Journal, 2017, vol. 127, issue 605, F24-F49

Abstract: 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.

Date: 2017
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Citations: View citations in EconPapers (29)

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https://doi.org/10.1111/ecoj.12334

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Working Paper: Why are households that report the lowest incomes so well-off (2013)
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