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Determinants of Wealth Fluctuation: Changes in Hard-To-Measure Economic Variables in a Panel Study.
Fabian T Pfeffer1, Jamie Griffin1
1University of Michigan.
Methoden, Daten, Analysen
|March 21, 2017
Summary
Large fluctuations in family net worth can reflect real economic changes, not just measurement errors. Improving data collection and processing can enhance the accuracy of wealth measurement in household panel studies.
Area of Science:
- Economics
- Sociology
- Survey Methodology
Background:
- Household panel studies are crucial for measuring economic fluctuations.
- A key critique is that extreme measured changes may stem from measurement error, not actual economic shifts.
- This study investigates the drivers of significant changes in economic well-being.
Purpose of the Study:
- To examine predictors of large fluctuations in family economic conditions.
- To differentiate between actual socio-economic changes and measurement error in wealth data.
- To identify improvements for longitudinal wealth measurement.
Main Methods:
- Utilized the Panel Study of Income Dynamics (PSID) dataset.
- Analyzed between-wave changes in net worth as a measure of total family wealth.
- Investigated socio-economic, demographic, and measurement-related factors influencing wealth fluctuation.
Main Results:
- Very large changes in net worth are often attributable to genuine socio-economic and demographic processes.
- Incomplete information handling emerged as a significant source of measurement error in wealth fluctuation.
- Identified specific areas for improving wealth variables in longitudinal surveys.
Conclusions:
- Large wealth changes in panel data can represent real economic dynamics.
- Addressing incomplete information is critical for reducing measurement error in wealth estimation.
- Recommendations are provided for enhancing data collection and processing to improve wealth variable accuracy.
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