Measuring the Well-Being of the Poor Using Income and Consumption

We evaluate consumption and income measures of the material well-being of the poor.We begin with conceptual and pragmatic reasons that favor income or consumption.Then, we empirically examine the quality of standard data by studying measurement error and under-reporting, and by comparing micro-data from standard surveys to administrative micro-data and aggregates.We also compare low reports of income and consumption to other measures of hardship and well-being.The closer link between consumption and well-being and its better measurement favors the use of consumption when setting benefits and evaluating transfer programs.However, income retains its convenience for determining program eligibility.