time, shopping patterns have shifted from individual purchases at a variety of neighborhood stores to collective purchasing at “big box” stores such as Walmart, Target, and Costco that sell everything from meat to shirts, furniture, and motor oil under one roof. The CE surveys are cognitively designed to collect spending information based on the 1970s world of purchasing behaviors, and today’s consumers are unlikely to relate to that.

Underreporting of expenditures is a long-standing problem with the CE as evidenced by a growing deviation from other data sources and by the results of several studies. This underreporting appears to differ sharply across commodities, raising the possibility of differential biases in the Consumer Price Index (CPI) and the picture of the composition of household spending. This is the biggest concern with the CE program. The Panel on Redesigning the BLS Consumer Expenditure Surveys believes that there are a number of issues with the current design and implementation of the CE, and that collectively these problems lead to the underreporting of expenditures. This chapter documents this underreporting and then discusses the issues and concerns that the panel identified in its study of the CE.

With that said, the panel understands that no survey is perfect. In fact all surveys are compromises between the need for specific data, the quality with which those data can be collected, and the burden and costs required to do so. The CE is no exception. It is the panel’s expectation that by examining the issues with the current CE along with some alternative designs, a new and better balance can be found between data requirements, data quality, and burden.

EVIDENCE OF UNDERREPORTING IN THE CE

In many federal surveys, one can assess the quality of data by comparisons with other sources of information. One of the difficulties in evaluating the quality of CE data is that there is no “gold standard” with which to compare the estimates. However, several sources provide insight into data quality. The National Research Council, in its review of the conceptual and statistical issues with the CPI, expressed concern about potential bias in the expenditure estimates from the CE. That report recommended comparison of the CE estimates with those from the Bureau of Economic Analysis’s Personal Consumption Expenditures (PCE):

The panel’s foremost concern is with the extent of bias in the CEX [Consumer Expenditure Surveys] which, in turn affects the accuracy of CPI expenditure category budget shares. A starting point for evaluating household expenditure allocations estimated by the CEX is to compare them against budget shares generated by other sources. The Bureau of Economic Analysis (BEA) produces the most obvious alternative, the per-capita and product accounts (NIPA). (National Research Council, 2002, p. 253)



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