LIMEW Reports | September 2004

How Much Does Wealth Matter for Well-Being?

Alternative Measures of Income from Wealth

Economic well-being refers to the command or access by members of a household over the goods and services produced in a modern market economy during a given period of time.The Levy Institute Measure of Economic Well-Being (LIMEW) is a comprehensive measure that is constructed as the sum of the following components: base money income (gross money income minus property income and government cash transfers), employer contributions for health insurance, income from wealth, net government expenditures (transfers and public consumption, net of taxes), and the value of household production.

Our previous work provided estimates of the LIMEW and its components for households in the United States, estimates of the LIMEW for some key demographic groups, and estimates of overall economic inequality. These estimates were compared with those based on the official measures (see Wolff, Zacharias, and Caner 2004 for more information regarding our concepts, sources, and methods). Some readers have questioned the sensitivity of our estimates to the particular types of imputation techniques that we use. This document explores the sensitivity of the LIMEW to the underlying assumptions on imputing income from wealth, a major component of the LIMEW. We provide new calculations for 1989 and 2000 that show that our initial major findings using the LIMEW hold up, generally, using alternative estimation procedures: mean income from wealth increases by decile, the share of mean income from wealth rises between 1989 and 2000, and inequality is higher in 2000 than 1989.

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