Long-Term Trends in the Levy Institute Measure of Economic Well-Being (LIMEW), United States, 1959-2004

Levy Economics Institute Working Paper No. 556

119 Pages Posted: 31 Jan 2009

See all articles by Edward N. Wolff

Edward N. Wolff

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER); Bard College - Levy Economics Institute

Ajit Zacharias

Bard College - Levy Economics Institute

Thomas Masterson

Bard College - Levy Economics Institute

Date Written: January 30, 2009

Abstract

We use here a new measure of household economic well-being called LIMEW. LIMEW is different in scope from the official U.S. Census Bureau measure of gross money income (MI) in that it includes taxes, noncash transfers, public consumption, income from wealth, and household production. We analyze trends in LIMEW from 1959 to 2004, and find that median LIMEW grew by 0.7 percent per year while median MI increased by 0.6 percent per year. LIMEW grew much slower than MI from 1959 to 1982, and much faster than MI from 1982 to 2004. In 2004, measured inequality was lower in LIMEW than MI (a difference of 5.5 Gini points); similarly, the increase in inequality between 1959 and 2004 was higher in MI than LIMEW (6.2 versus 5.1 Gini points). Much of the difference in these measures can be traced to the role of net government expenditures.

According to both measures, the racial gap narrowed from 1959 to 1989; it then widened somewhat from 1989 to 2004 according to LIMEW but continued to narrow according to MI. The difference in time trends can be traced mainly to the rising income from wealth of white households relative to nonwhite households. The gap in well-being between single females and married couples widened from 1959 to 1989 and then narrowed slightly between 1989 and 2004 according to LIMEW but increased rather steadily from 1959 to 2004 according to MI. The fortunes of the elderly relative to the nonelderly showed considerable improvement from 1959 to 2004 according to LIMEW, almost reaching parity in 2004. In contrast, according to MI, the relative position of the elderly was about the same in 2004 as in 1959. In this instance, the difference in time trends can be traced mainly to rising income from wealth and government transfers accruing to the elderly relative to the nonelderly.

Keywords: Well-Being, Living Standards, Inequality

JEL Classification: D31, D63, P17

Suggested Citation

Wolff, Edward N. and Zacharias, Ajit and Masterson, Thomas, Long-Term Trends in the Levy Institute Measure of Economic Well-Being (LIMEW), United States, 1959-2004 (January 30, 2009). Levy Economics Institute Working Paper No. 556, Available at SSRN: https://ssrn.com/abstract=1335305 or http://dx.doi.org/10.2139/ssrn.1335305

Edward N. Wolff (Contact Author)

New York University (NYU) - Department of Economics ( email )

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Bard College - Levy Economics Institute

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Ajit Zacharias

Bard College - Levy Economics Institute ( email )

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HOME PAGE: http://www.levy.org

Thomas Masterson

Bard College - Levy Economics Institute ( email )

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