The Levy Institute Measure of Economic Well-Being
The Levy Institute Measure of Economic Well-Being (LIMEW) is informed by the view that three key institutions—the market, state, and household—mediate the access of the members of the household to the goods and services produced in a modern market economy. The magnitude of the access that can be exercised by the household is approximated by a well-being measure that reflects the resources that the household can command for facilitating current consumption or acquiring physical or financial assets. The three institutions form interdependent parts of an organic entity, and household economic well-being is fundamentally shaped by the complex functioning of this entity.
The LIMEW has two crucial characteristics. First, its focus is limited to components that can be converted into money equivalents. Second, it is a household-level measure that can be evaluated for households in different economic and demographic groups, such as those in different percentiles of the income distribution or those in different racial groups.
The LIMEW is constructed as the sum of the following components: base money income (gross money income less government cash transfers and property income), the value of certain employer-provided in-kind benefits, income from wealth, net government expenditures (transfers and public consumption net of taxes), and the value of household production. In the absence of an ideal, unified database to measure household economic well-being, the LIMEW is built using mainly information from income and employment surveys (e.g., the Annual Demographic Supplement of the Current Population Survey conducted by the US Census Bureau), other surveys on wealth and time use, National Income and Product Accounts, and government agencies.
In the Media | November 2021
By Jean YungNew US Consumption Gauge To Include Unpaid Work, Housing
The U.S. Bureau of Labor Statistics will incorporate estimates of the value of unpaid household work and home ownership into a new measure of consumption, aiming for a more comprehensive view of living standards at a time when policymakers are increasingly concerned with addressing inequality.
Read more at: https://marketnews.com/homepage/mni-us-bls-to-develop-novel-consumption-measureAssociated Program:
Research Project Reports | April 2019
An Assessment of Care Deficits, Costs, and Impact on Employment, Gender Equality, and Fiscal ReturnsExpansion of early childhood education and care (ECEC) services for all is a matter of the choices made regarding the allocation of public resources. As such, it is as much an issue of children’s well-being and gender equality as it is an issue of economic policy and fiscal allocation. This study—authored by Institute scholars Ipek Ilkkaracan and Kijong Kim as a joint production of the Macroeconomic Team of the Economic Empowerment Section at UN Women and UN Women’s Country Team in Kyrgyz Republic—contributes to the policy debate on ECEC expansion in Kyrgyz Republic, particularly from a fiscal policy perspective that focuses on potential short-run economic returns.
Following in the footsteps of recent country policy studies, this research report estimates the required increase in public expenditures on ECEC centers according to different policy scenarios specific to Kyrgyz Republic. The report estimates short-run, demand-side economic returns regarding employment creation, the gender employment gap, and the fiscal sustainability of the initial outlay of expenditures through increased tax revenues. The simulation for ECEC service expansion is compared to the counterfactual scenario where fiscal expenditure of identical magnitude is allocated toward physical infrastructure and construction projects, a common target sector for public spending.Download:Associated Program(s):Author(s):Related Topic(s):
One-Pager No. 57 | September 2018The Levy Institute Measure of Economic Well-Being (LIMEW) was designed to provide a more comprehensive understanding of the changes affecting household living standards. Ajit Zacharias, Thomas Masterson, and Fernando Rios-Avila summarize their latest research on the trends in economic well-being for US households. They reveal historic stagnation in LIMEW growth over the 2000–13 period, as well as a major shift in the composition of well-being. The post-2000 period can be characterized as one of a growing dependence on the government to sustain living standards, with rising net government expenditures offsetting a sharp drop in base income.Download:Associated Program(s):Author(s):Related Topic(s):
Working Paper No. 914 | September 2018This paper describes the quality of the statistical matching between the March 2014 supplement to the Current Population Survey (CPS) and the 2013 American Time Use Survey (ATUS) and Survey of Consumer Finances (SCF), which are used as the basis for the 2013 Levy Institute Measure of Economic Well-Being (LIMEW) estimates for the United States. In the first part of the paper, the alignment of the datasets is examined. In the second, various aspects of the match quality are described. The results indicate that the matches are of high quality, with some indication of bias in specific cases.Download:Associated Program:Author(s):Related Topic(s):
Working Paper No. 912 | August 2018This paper documents the sources of data used in the construction of the estimates of the Levy Institute Measure of Economic Wellbeing (LIMEW) for the years 1959, 1972, 1982, 1989, 1992, 1995, 2000, 2001, 2004, 2007, 2010, and 2013. It also documents the methods used to combine the various sources of data into the synthetic dataset used to produce each year’s LIMEW estimates.Download:Associated Program:Author(s):Related Topic(s):
Public Policy Brief No. 146 | August 2018
Post-2000 Trends in the United StatesAjit Zacharias, Thomas Masterson, and Fernando Rios-Avila update the Levy Institute Measure of Economic Well-Being (LIMEW) for US households for the period 2000–13. The LIMEW—which comprises base income, income from wealth, net government expenditures, and the value of household production—is aimed at achieving a more comprehensive understanding of trends in living standards. This policy brief analyzes developments during this period at all levels of the LIMEW distribution, with a particular focus on the significant role played by net government expenditures. The overall trend for 2000–13 was one of historic stagnation in the growth of economic well-being for US households, but an examination of the different components of the measure reveals significant shifts taking place behind this headline trend.
A companion document, the Supplemental Tables, features additional data referenced in the policy brief.
Details about the sources of data and methods used to construct the estimates in this policy brief are discussed in Levy Institute Working Paper No. 912.Download:Associated Program(s):Author(s):Related Topic(s):
Press Releases | December 2017
Working Paper No. 798 | May 2014
This paper describes the quality of the statistical matching between the March 2011 supplement to the Current Population Survey and the 2010 American Time Use Survey and Survey of Consumer Finances, which are used as the basis for the 2010 LIMEW estimates for the United States. In the first part of the paper, the alignment of the datasets is examined. In the second, various aspects of the match quality are described. The results indicate that the matches are of high quality, with some indication of bias in specific cases.Download:Associated Program(s):Author(s):Related Topic(s):
In the Media | February 2012
By Rachel Mendleson
Huffington Post Canada, February 3, 2012. Copyright © 2012 TheHuffingtonPost.com, Inc. All rights reserved.
As debate about income inequality mounts, a new study [see Working Paper No. 703] underscores how important public investment in social programs like education and health care is in narrowing the rich-poor divide.
At a time when Ottawa prepares to beat back the deficit with public spending cuts, the findings also show that the effect of Canada’s social safety net on narrowing the income gap waned in the early 2000s.
“There seems to be a decline in the role of transfers on inequality in Canada,” says Andrew Sharpe, director of the Centre for the Study of Living Standards in Ottawa, and co-author of the study by the New York–based Levy Institute of Bard College.
Efforts to quantify the rich-poor divide often focus on basic income—namely, how much households earn in a given year. But in their comparison of income inequality in the U.S. and Canada, the authors of the working paper, released in January, endeavour to take a more comprehensive approach.
According to Sharpe, the aim is to “go beyond standard measures of income” to include other factors that play a role in household wealth: taxes and transfers; government expenditures on goods and services, such as housing, education and health care; time spent on household tasks; and the value of major assets.
Including these other elements when calculating income inequality tends to have a narrowing effect, he explains, “because everybody gets government services and everybody does household work.”
The vast amount of data required to make such comparisons limited the scope of the study somewhat—to 1999 and 2005 in Canada, and 2000 and 2004 in the U.S.—but the snapshots give some indication of how much these other factors have been affecting inequality in recent years.
The authors calculated inequality using two different measures. The first, dubbed Money Income (MI), only takes into account gross income and government transfers. However, the second, called the Levy Institute Measure of Economic Well-Being (LIMEW), also includes the effect of the other factors outlined by Sharpe, many of which are related to the strength of public services and programs.
On both sides of the border, the gap, measured with the Gini coefficient, the standard unit used to gauge inequality, was significantly narrowed when these other sources of wealth were taken into account.
In Canada in 1999, for instance, when inequality was calculated using the LIMEW, the Gini coefficient was 17 per cent lower; in 2005, meanwhile, it was 13 per cent lower.
The findings show that factors besides income (such as government spending on education and health care) do a better job at smoothing out inequality in Canada than in the U.S. But they also demonstrate that, from 1999 to 2005, this package of benefits became less effective at levelling the playing field.
This likely came as little surprise to Sharpe, who recently advocated for greater government investment as a means of curbing income inequality.
In a a report on reducing disparities published in November by Canada 2010—a think-tank established to “create an environment of social and economic prosperity”—Sharpe was among a group of public policy experts and economists who called on Ottawa to “analyze and consider the longer term effects of income polarization, and consider the strategic policy reforms to head off a looming problem.”
Among other fixes, the report suggests addressing the growing gap by imposing an inheritance tax, enhancing child benefits and increasing investment in post-secondary education.
“Public services are . . . an essential element of the redistributive effort of government,” Sharpe wrote. “Erosion of public services will thus tend to increase inequality, something that is not often at the forefront of discussion when cuts are proposed."
Working Paper No. 703 | January 2012
We use the Levy Institute Measure of Economic Well-being (LIMEW), the most comprehensive income measure available to date, to compare economic well-being in Canada and the United States in the first decade of the 21st century. This study represents the first international comparison based on LIMEW, which differs from the standard measure of gross money income (MI) in that it includes noncash government transfers, public consumption, income from wealth, and household production, and nets out all personal taxes.
We find that, relative to the United States, median equivalent LIMEW was 11 percent lower in Canada in 2000. By 2005, this gap had narrowed to 7 percent, while the difference in median equivalent MI was only 3 percent. Inequality was notably lower in Canada, with a Gini coefficient of 0.285 for equivalent LIMEW in 2005, compared to a US coefficient of 0.376—a gap that primarily reflects the greater importance of income from wealth in the States. However, the difference in Gini coefficients declined between 2000 and 2005. We also find that the elderly were better off relative to the nonelderly in the United States, but that high school graduates did better relative to college graduates in Canada.Download:Associated Program(s):Author(s):Related Topic(s):