Determining household financial needs is crucial for the measurement of poverty and inequality, the design of benefit systems, and many other applications. The increasing use of subjective data for needs measurement challenges not only traditional methodology, but also provides systematically lower estimates of household needs compared to other methods. This paper offers a novel take on this puzzle and argues that the failure to account for asset ownership in subjective measurement is part of the explanation of why household financial needs appear to be low. It argues that wealthy survey respondents claim to be satisfied with less income, as they can draw on their asset buffer to maintain a given living standard. Capitalising on SOEP survey data, I find that the needs of a household comprising five members relative to a reference household might be underestimated by up to a quarter if wealth is not accounted for. Making a case for multidimensional approaches towards household needs measurement, this treatments warrants caution when drawing on subjective evidence for the calibration of benefit systems and monitoring social conditions.
2 Okt. 2020
AK Young Economists Conference
Österreichische Systematik der Wissenschaftszweige (ÖFOS)