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Measuring Poverty: A New Approach
tion- or expenditure-based definition of resources; hence, there is virtually no practical alternative to using an income-based definition. Of course, there are many arguments in favor of an income definition, but there are also strong arguments in favor of a consumption or expenditure definition. We believe it is important to consider improvements to the Consumer Expenditure Survey that would permit its use in estimating resources for poverty measurement purposes.30
We propose use of the current CEX for deriving and updating the poverty thresholds, for which the data requirements are not as demanding as they are for estimating resources (e.g., sample sizes can be smaller). However, even for this purpose, we believe it is important to consider improvements to the survey. In general, improvements to the CEX would be very useful to support research and policy analysis on consumption and savings behavior and the relationship of consumption, income, and wealth.
The most costly improvement to explore would be an expansion of the sample size. A major expansion, from 5,000 households or consumer units (the number provided for analysis purposes by the Interview Survey component of the CEX) to 50,000-60,000 households (i.e., the sample size of SIPP or the March CPS) would be required for the CEX to serve as the vehicle for estimating resources. A more modest expansion—perhaps doubling the current sample size—would improve the quality of the data for updating the poverty thresholds under the proposed procedure. More generally, such an expansion would make the data more useful for analyzing trends in expenditures and consumption patterns across population groups.
Another area to explore is the development of methods to reduce recall and other reporting errors and to improve the survey's response rate. We surmise that the length and complexity of the questionnaire may be major factors in impairing response. The CEX questionnaire is far more complex than the SIPP questionnaire. The latter has often been criticized for length and complexity, but the burden it poses is less than it would appear for the many people who have relatively few sources of income. In contrast, most people spend money on a wide variety of goods and services and hence must answer most of the detailed questions in the CEX. We understand that the current level of detail may be needed for purposes of respecifying the market basket for the CPI (which is done about once every 10 years); however, a more streamlined questionnaire might be more effective for the purposes of poverty measurement and other analytical uses of expenditure data. One possibility could be to embed a more detailed survey for a subsample of respondents within a larger, more streamlined survey.
Yet another area to explore concerns the overall CEX design, which currently consists of two separate surveys (the Diary Survey and the House