Is the Age Gradient in Self-Reported Material Hardship Explained By Resources, Needs, Behaviors, or Reporting Bias?

Authors


  • Note: We thank Bruce Bradbury, Rob Bray, Deborah Cobb-Clark, Sara Dolnicar, Paul Frijters, and two anonymous referees for helpful comments. The paper also benefited from comments made by participants of the 2010 Australian Conference of Economists, the XXV Italian National Conference on Labour Economics, the Frontiers in Human Capital Research Workshop, the SINET Conference, and seminars at the University of Wollongong and the Social Policy Research Centre (UNSW). We acknowledge the excellent research assistance of James Bishop. This paper uses unit record data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey. The HILDA Project was initiated and is funded by the Australian Government Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) and is managed by the Melbourne Institute of Applied Economic and Social Research (Melbourne Institute). The findings and views reported in this paper, however, are those of the authors and should not be attributed to either FaHCSIA or the Melbourne Institute.

Peter Matthew Siminski, School of Economics, University of Wollongong, Northfields Ave., Wollongong, NSW 2522, Australia (siminski@uow.edu.au).

Abstract

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 this age 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 and Labour Dynamics Australia (HILDA) survey, which collects reports of hardship from all adult household members. This facilitates within-couple estimates, allowing us to identify age-related reporting bias. The majority of the raw age–hardship gradient 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 behavioral choices. Reporting error does not appear to contribute to the age gradient.

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