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Economic well-being can be described using various measures. Two are examined in this study. These are based on personal or subjective assessments of minimum income (MIQ) to make ends meet and minimum spending (MSQ) for basic necessities. This work builds upon that of others, particularly the Leyden group, a team of Dutch researchers conducting research on similar measures in the early 1970s. Variations of the measures developed by that group have been used to assess economic well-being, estimate equivalence scales, income sufficiency, and poverty thresholds.
Data for this study are from the Basic Needs Module of the U.S. Survey of Income and Program Participation (SIPP). Data were collected in 1995 from individuals who entered the SIPP in 1993. The MIQ and MSQ are essentially the same as those used in a Statistics Canada survey conducted in 1988. A regression intersection approach is used to estimate thresholds for U.S. households distinguished by size and composition. The estimated MIQ and MSQ thresholds are higher than current U.S. official poverty thresholds and those based on a National Academy of Sciences methodology. Thresholds based on the MIQ are higher than those based on the MSQ. Equivalence scales derived from the estimated subjective thresholds imply greater economies of scale than those implicit in the other measures previously noted, but are similar to behavioral scales derived from econometric analyses of household expenditure data. The flatness of the scales suggest that personal assessment or subjective-based scales, like behavioral scales, account for the trade-offs families make to meet their minimum needs. Based on this research, and that of others, we conclude that MIQ and MSQ measures are useful complements to other measures of economic well-being. Societal norms on what constitutes a minimum standard or level of living can be assessed through the use of personal assessment questions like the MIQ and MSQ.
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WORKING PAPER
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