Non-cash Income, Living Standards and Inequality: Evidence from the Luxembourg Income Study

Abstract

The economic well-being of households is determined by their resources relative to their measurable economic needs. Economic resources include both cash and non-cash income. While after-tax cash income is the most widely employed measure of household economic well-being, it may exclude considerable amounts of resources received in a non-cash form. These include health care, education, housing, food and other subsidies from governments; production for own consumption by farmers, peasants and other individuals living mainly in rural areas and small towns; and in-kind transfers received from relatives, friends and others in the form of food, clothing and/or shelter. Moreover the distribution of these non-cash resources may vary systematically by population subgroup, thus affecting measures of relative economic well-being within and between households. They may also differ systematically by country. They almost certainly differ by regime, for example in the post-communist reforming socialist economies (RSEs) as compared with Western European and other Western nations.2