Measurement Error in Imputed Consumption

presented at "Trans-Atlantic Public Economics Seminar", June 4-5, 2018

Scott Baker, Lorenz Kueng, Steffen Meyer, Michaela Pagel

Publikation: Konferencebidrag uden forlag/tidsskriftPaperForskningpeer review

Resumé

Because of limitations in survey-based measures of household consumption, a growing literature uses an alternative measure of consumer expenditures commonly referred to as "imputed consumption." This approach typically utilizes annual snapshots of household income and wealth from administrative tax registries to calculate household spending as the residual of the household budget constraint. In this paper we use transaction-level retail investment data to assess the measurement error that can result in imputed consumption due to intra-year changes in asset values and composition. We show that substantial discrepancies between imputed and actual spending can arise due to trading costs, asset distributions, variable trade timing, and volatile asset prices between two annual snapshots. While these errors tend to be quantitatively small and centered around zero on average, we demonstrate that they vary across individuals of different types and income levels and are highly correlated with the business cycle. We end by suggesting ways to minimize the impact of these imputation errors in future research and we discuss which research questions are least likely to suffer from such errors.
OriginalsprogEngelsk
Publikationsdato2018
StatusUdgivet - 2018
BegivenhedTrans-Atlantic Public Economics Seminar - London
Varighed: 4. jun. 20185. jun. 2018

Konference

KonferenceTrans-Atlantic Public Economics Seminar
LokationLondon
Periode04/06/201805/06/2018

Fingeraftryk

Measurement error
Public economics
Household
Trading costs
Asset prices
Income level
Tax
Household income
Registry
Retail
Assets
Household wealth
Asset value
Imputation
Business cycles
Household consumption
Discrepancy
Consumer expenditure
Budget constraint

Citer dette

Baker, S., Kueng, L., Meyer, S., & Pagel, M. (2018). Measurement Error in Imputed Consumption: presented at "Trans-Atlantic Public Economics Seminar", June 4-5, 2018. Afhandling præsenteret på Trans-Atlantic Public Economics Seminar, .
Baker, Scott ; Kueng, Lorenz ; Meyer, Steffen ; Pagel, Michaela. / Measurement Error in Imputed Consumption : presented at "Trans-Atlantic Public Economics Seminar", June 4-5, 2018. Afhandling præsenteret på Trans-Atlantic Public Economics Seminar, .
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Baker, S, Kueng, L, Meyer, S & Pagel, M 2018, 'Measurement Error in Imputed Consumption: presented at "Trans-Atlantic Public Economics Seminar", June 4-5, 2018' Paper fremlagt ved Trans-Atlantic Public Economics Seminar, 04/06/2018 - 05/06/2018, .

Measurement Error in Imputed Consumption : presented at "Trans-Atlantic Public Economics Seminar", June 4-5, 2018. / Baker, Scott; Kueng, Lorenz; Meyer, Steffen; Pagel, Michaela.

2018. Afhandling præsenteret på Trans-Atlantic Public Economics Seminar, .

Publikation: Konferencebidrag uden forlag/tidsskriftPaperForskningpeer review

TY - CONF

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T2 - presented at "Trans-Atlantic Public Economics Seminar", June 4-5, 2018

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AU - Meyer, Steffen

AU - Pagel, Michaela

PY - 2018

Y1 - 2018

N2 - Because of limitations in survey-based measures of household consumption, a growing literature uses an alternative measure of consumer expenditures commonly referred to as "imputed consumption." This approach typically utilizes annual snapshots of household income and wealth from administrative tax registries to calculate household spending as the residual of the household budget constraint. In this paper we use transaction-level retail investment data to assess the measurement error that can result in imputed consumption due to intra-year changes in asset values and composition. We show that substantial discrepancies between imputed and actual spending can arise due to trading costs, asset distributions, variable trade timing, and volatile asset prices between two annual snapshots. While these errors tend to be quantitatively small and centered around zero on average, we demonstrate that they vary across individuals of different types and income levels and are highly correlated with the business cycle. We end by suggesting ways to minimize the impact of these imputation errors in future research and we discuss which research questions are least likely to suffer from such errors.

AB - Because of limitations in survey-based measures of household consumption, a growing literature uses an alternative measure of consumer expenditures commonly referred to as "imputed consumption." This approach typically utilizes annual snapshots of household income and wealth from administrative tax registries to calculate household spending as the residual of the household budget constraint. In this paper we use transaction-level retail investment data to assess the measurement error that can result in imputed consumption due to intra-year changes in asset values and composition. We show that substantial discrepancies between imputed and actual spending can arise due to trading costs, asset distributions, variable trade timing, and volatile asset prices between two annual snapshots. While these errors tend to be quantitatively small and centered around zero on average, we demonstrate that they vary across individuals of different types and income levels and are highly correlated with the business cycle. We end by suggesting ways to minimize the impact of these imputation errors in future research and we discuss which research questions are least likely to suffer from such errors.

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Baker S, Kueng L, Meyer S, Pagel M. Measurement Error in Imputed Consumption: presented at "Trans-Atlantic Public Economics Seminar", June 4-5, 2018. 2018. Afhandling præsenteret på Trans-Atlantic Public Economics Seminar, .