Errors in Survey Reports of Consumption Expenditures

Abstract

This paper considers data quality issues to analyze the pattern of consumption inequality in the 1990s exploiting two complementary datasets from the US Consumer Expenditure Survey. The Interview sample follows survey households over four calendar quarters and consists of retrospectively asked information about monthly expenditures on durable and non-durable goods. The Diary sample interviews household for two consecutive weeks, and it includes detailed information about frequently purchased items (food, personal cares and household supplies). Each survey has its own questionnaire and sample. We exploit information from one sample as an instrument for the other to derive a correction for the measurement error affecting observed measures of consumption. We produce some evidence of non-classical measurement error affecting the aggregate measure of consumption both for diary and recall based data; we also show the implications of our findings to test for the Permanent income hypothesis.