A Multi-dimensional Measure of Economic Well-Being for the U.S.: The Material Condition Index

• Activity Number: 181
• Type: Contributed
• Date/Time: Monday, August 5, 2013 : 10:30 AM to 12:20 PM
• Sponsor: Business and Economic Statistics Section
• Author(s): Thesia Garner*+ and Kathleen Short
• Companies: Bureau of Labor Statistics and US Census Bureau
• Keywords: Income distribution ; expenditures distribution ; wealth distribution ; joint distributions ; economic well-being

Abstract

Most often the economic-well-being of a country is described in terms of aggregates (e.g., National Accounts), means (e.g., household incomes), and/or in a single index such as a Gini coefficient. In addition, often only one dimension, for example income, is presented. Focusing on one dimension provides a distorted picture of the economic well-being of individuals and households. With the Stiglitz-Sen-Fitoussi Commission (2009) report, attention has turned toward more encompassing measures that reflect the inter-relationship of aspects of well-being. The focus of this study is the joint distribution of income, consumption, and wealth. Following the framework developed by Ruiz (2010), income, expenditures, and wealth are mapped into a single index, the Material Condition Index (MCI). Household level data from the U.S. Consumer Expenditure Survey Interview are used to estimate the index. We test whether the joint distribution of income, expenditures, and wealth results in a different picture of economic well-being than does any of the three components do alone. This is done by comparing the MCI with inequality indexes based on each component separately.