The measurement and structure of household wealth

Abstract

This paper deals with methodological issues that arise in measuring household wealth. Two prominent American household surveys—the PSID and SCF—rely on different methodological approaches to the measurement of household wealth. In particular, SCF oversamples high-income households and has a far more extensive set of questions. In the top one percent of the wealth distribution, better measures of wealth are related to over-sampling of very wealthy households and the number of questions that are asked. However, one can characterize total household wealth holdings for the overwhelming majority of households with a relatively moderate number of questions. When successive waves of wealth modules are used to compute savings, the verdict on quality is more cautious, in part due to the inherently larger role measurement error plays in any first difference formulation.