“Why are Households that Report the Lowest Incomes So Well‐off?”
The authors of this article document that households in the UK with extremely low measured income tend to spend much more than those with merely moderately low income. This phenomenon is evident throughout three decades worth of microdata and across different employment states, levels of education and marital statuses. Of the likely explanations, the authors provide several arguments that discount over‐reporting of expenditure and argue that under‐reporting of income plays the major role.