Academic journal article Economic Inquiry

Integrated Household Surveys: An Assessment of U.S. Methods and an Innovation

Academic journal article Economic Inquiry

Integrated Household Surveys: An Assessment of U.S. Methods and an Innovation

Article excerpt

I. INTRODUCTION

During recent decades, interest in the study of household finance has grown rapidly. Campbell (2006) first advanced the case for treating household finance as a distinct field of study in economics. The global financial crisis of 2008-2009 strengthened that case due to the subprime housing debacle in many industrial economies and its persistent impact on household balance sheets. In particular, the extent and nature of increased leverage and risk in household mortgages and their effects on the real (housing industry) and financial (shadow banking) sectors of the economy were not well known or understood prior to the crisis. Consequently, there is now a focus on household decision making, how households got into this trouble, what transpired in the crisis, and the difficulties encountered thereafter. (1)

A hindrance to research and understanding of household economic behavior (real and financial) has been the lack of sufficient data. Relative to other countries, the United States has a large amount of high-quality data on household economic behavior; these data will be examined closely in this paper. Even the U.S. data, however, were inadequate to inform economic agents and policymakers sufficiently to avoid the financial crisis. Many efforts are underway to acquire and develop additional needed data; these efforts include the Eurosystem's Household Finance and Consumption Survey (HFCS), which was inspired partly by the U.S. Survey of Consumer Finances (SCF). (2) Other efforts, such as the National Academy of Science's call for a substantially revised Consumer Expenditure Survey (CE), aim to reform existing datasets (Dillman and House 2013).

The U.S. household survey data exhibit several characteristics that limit their effectiveness. The U.S. statistical system (public and private) is decentralized, with each data source specializing in a part of household activity. Although there are often good reasons for specialization, the result is a general lack of comprehensive measurement of household activity. Many datasets are cross-sectional, which limits their ability to track the behavior of specific households over time, and are gathered infrequently. When data sources are combined in an effort to provide a more comprehensive view of household behavior, the combination of the specialized data sources can create imperfect, if not misleading, views of household economic conditions, due to differences in sampling, measurement, and linkages between microeconomic and aggregate data. (3) These imperfections make it difficult to ascertain from the data the extent and nature of important developments, such as adjustments affecting household balance sheets in the wake of financial crisis, increases in income inequality, and intergenerational dynamics of household net worth.

Data on household behavior in other countries also exhibit limitations, but there are signs of improvement in response to major economic developments. Most notably, the financial crisis reaffirmed the view that household finance is at the center of development economics because financial access is thought to be one of the key factors that could help poor and vulnerable households become more productive and resilient in the face of economic shocks. In addition, there have been payment innovations such as M-Pesa in Kenya, an electronic money issued by a cell phone company, Safaricom, that in many respects is now on par with currency there as a medium of exchange (Jack, Suri, and Townsend 2010). The often-expressed hope in developing economies is that a deeper, more developed financial system can be built on top of such an improved payments system, with some progress evident in countries such as Pakistan. (4) These developments bring us back to the need for better data on payments, household behavior, and a microfounded view of the macroeconomy in developing countries. Fortunately, more countries are producing data from household surveys that are doing a better job of measuring these developments. …

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