Abstract

Estimates of average per capita consumption and income from national accounts differ substantially from corresponding measures of consumption and income from household surveys. Using a new compilation of more than 2,000 household surveys matched to national accounts data, this study finds that the gaps between the data sources are larger and more robust than previously established. Means of household consumption estimated from surveys are, on average, 20 percent lower than corresponding means from national accounts. The gap with gross domestic product per capita is nearly 50 percent. The gaps have increased in recent decades and are largest in middle-income countries, where annualized growth rates for consumption surveys are systematically lower than national accounts growth rates. The paper shows that the gaps in measures across these two sources have implications for assessments of economic growth, poverty, and inequality. The study finds that typical survey measures of consumption and income may exaggerate poverty reduction and underestimate inequality.

Highlights

  • Measures of per capita income and consumption are among the most frequently cited indicators of economic development

  • Across all countries, we find that per capita consumption means are about 22 percent lower in surveys compared with national accounts (i.e., household final consumption expenditures (HFCE)), and per capita income means from surveys are about 52 percent lower than per capita gross domestic product (GDP)

  • Our main comparison between survey and national accounts data focuses on comparing the survey household consumption aggregate with the component of national accounts that corresponds to household expenditure, known as household final consumption expenditure (HFCE) and established in the 1993 System of National Accounts

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Summary

Introduction

Measures of per capita income and consumption are among the most frequently cited indicators of economic development They are widely used in assessments of living standards, economic growth, poverty, and inequality, both within and across countries. Across all countries, we find that per capita consumption means are about 22 percent lower in surveys compared with national accounts (i.e., HFCE), and per capita income means from surveys are about 52 percent lower than per capita GDP This indicates considerably larger discrepancies than what was found in Deaton’s and Ravallion’s assessments. We discuss implications of assuming that the gap is fully due to errors in survey data and that these errors are distribution neutral (proportionally uniform across the income distribution) This is similar to scaling up survey means to national accounts means, in line with the methods applied by Bhalla (2002), Sala-iMartin (2006) and Pinkovskiy and Sala-i-Martin (2014; 2016).

Data National accounts
Conclusion
Country-specific adjustment (1990) Global
Global Inequality
Findings
HHS bottom 40% vs NAS mean (HFCE)

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