Is the age gradient in self-reported material hardship explained by resources, needs, behaviours or reporting bias?
Siminski, Peter M. and Yerokhin, Oleg, Is the age gradient in self-reported material hardship explained by resources, needs, behaviours or reporting bias?, Department of Economics, University of Wollongong, Working Paper 02-10, 2010, 37p.
Older people report much less hardship than younger people in a range of contexts, despite lower incomes. Hardship indicators are increasingly influential, so the source of the gradient has considerable policy implications. We propose a theoretical and empirical strategy to decompose the sources of this relationship. We exploit a unique feature of the Household, Income & Labour Dynamics Australia (HILDA) survey, which collects reports of hardship from all adult household members, facilitating within-couple estimates. The majority of the relationship is explained by observed resources, particularly wealth and home ownership. One third of the relationship is explained by unobserved differences between households, which we interpret as age-related behavioural choices. Reporting error does not appear to contribute to the age gradient.