<p>Despite the widespread use of income as a measure of household welfare, there is much to recommend the use of consumption. Indeed, standard economic arguments suggest that consumption expenditure will better reflect expected lifetime resources and many economists have been unequivocal in advocating its use. Slesnick (1993), for example, suggests that 'From a theoretical perspective it is more appropriate to evaluate poverty using a consumption based measure of household welfare'. Cutler and Katz (1992) state that 'Economic theory suggests that permanent income or consumption is a more accurate measure of the distribution of resources than is current income'. Poterba (1989) argues that 'If households base their spending plans on their expected lifetime income, then consumption provides a more accurate measure of resources than does annual income'.</p>
Authors
Richard Blundell
CPP Co-Director
Richard is Co-Director of the Centre for the Microeconomic Analysis of Public Policy (CPP) and Senior Research Fellow at IFS.
Ian Preston
Research Fellow University College London
Ian is a Research Fellow of the IFS and a Professor of Economics at UCL. He joined UCL in 1991 and has been attached to the IFS since 1990.
Journal article details
- ISSN
- Print: 0143-5671 Online: 1475-5890
- Issue
- August 1995
Suggested citation
Blundell, R and Preston, I. (1995). 'Income, expenditure and the living standards of UK households' (1995)
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