Well‐Being, Deprivation, and the Great Recession in the U.S.: A Study in A Multidimensional Framework

• Published date: 01 November 2019
• Author: Shatakshee Dhongde,Prasanta K. Pattanaik,Yongsheng Xu
• Date: 01 November 2019
• DOI: http://doi.org/10.1111/roiw.12411

© 2019 Internation al Association for Re search in Inco me and Wealth

S281

WELL-BEING, DEPRIVATION, AND THE GREAT RECESSION IN THE

U.S.: A STUDY IN A MULTIDIMENSIONAL FRAMEWORK

by ShatakShee DhongDe*

Georgia In stitute of Technology

PraSanta k. Pattanaik

University of California Riverside

AND

yongSheng Xu

Georgia State University

We study changes in social well-being and deprivation in the U.S. during the Great Recession and the

subsequent recovery. We outline an analytical framework for measuring well-being and deprivation in a

multidimensional fashion when data on achievement in each dimension is assumed to be ordinal and

binary in nature. We use data from the American Community Survey between 2008 and 2015 and find

that there was a decline in social well-being and a rise in social deprivation in the U.S. during the reces-

sion followed by a reversal of trends during the recovery. Despite low deprivation levels among the

White population, this population experienced the largest increase in deprivation during the recession

and the least decline in deprivation in the recovery period. These results underscore the fact that the

impact of recession and the subsequent recovery varied significantly across population groups.

JEL Codes: D36, I31, J10

Keywords: deprivation, multidimensional, recession, well-being, United States

1. introDuction

The Great Recession at the turn of the last decade was a searing experience for

the American society. The official poverty measure based on the head-count ratio

increased from about 13 percent in 2008 to almost 15 percent in 2011.1 In addition

to affecting income levels, the recession had far reaching consequences on other

indicators of quality of life such as health and housing. How the Great Recession

affected the society’s overall well-being and deprivation and what happened during

1https://www.census.gov/topics/income-poverty/poverty.html.

Note: We are grateful to the editors and two referees of this journal for providing numerous helpful

comments. An earlier version of the paper was presented at the IARIW-Bank of Korea conference held

in Seoul, South Korea in April 2017. We are grateful to Andrea Brandolini for discussing the paper at

the conference and providing useful suggestions. We would also like to thank participants at a confer-

ence organized by the Society for Economic Measurement, held at Massachusetts Institute of

Technology, Cambridge, Massachusetts, where a draft of the paper was presented in July 2017.

*Correspondence to: Shatakshee Dhongde, School of Economics, Georgia Institute of Technology,

Atlanta, GA 30332, USA (shatakshee.dhongde@econ.gatech.edu).

Review of Inc ome and Wealth

Series 65, Numb er S1, November 2019

DOI : 10.1111 /roi w.12411

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Review of Income and Wealth, Series 65, Number S1, November 2019

S282

© 2019 Internation al Association for Re search in Inco me and Wealth

the recovery which followed the recession are important issues which deserve seri-

ous study. The United Nations Human Development Report annually publishes a

multidimensional poverty index for almost 100 developing countries. Several coun-

tries officially release their own estimates of multidimensional poverty measures.

For example, Bhutan, Chile, Colombia, Costa Rica, Ecuador, El Salvador Mexico,

and the Philippines release official estimates of multidimensional poverty. In addi-

tion to the official statistics, there has been a rapid expansion of literature estimat-

ing multidimensional measures among countries (Alkire et al., 2015). One might

expect that there would be similar studies measuring the impact of the Great

Recession on multidimensional well-being and deprivation in the U.S. It is rather

surprising that this has indeed not been the case. Dhongde and Haveman (2017) is

perhaps the only comprehensive paper which systematically measures multidimen-

sional deprivation in the U.S. during the Great Recession. As far as we know, ours

is the first paper to use an axiomatic approach to measure multidimensional

well-being and deprivation in the U.S. over a period of 8 years spanning the Great

Recession and the subsequent recovery. We study changes in overall well-being and

deprivation, as well as changes in these measures among several population

groups.2

Our study uses a conceptual and analytical framework that draws on the con-

tributions of Dhongde et al. (2016). While the contributions of Dhongde et al.

(2016) focus on measures of social deprivation, we first study axiomatically a class

of measures of social well-being in the context of ordinal and binary data. Our

measures of social well-being can be constructed in three steps: (i) for each indi-

vidual, we compute the individual’s overall achievement defined as a weighted sum

of her achievements in all dimensions (the weight attached to the achievement in

any given dimension being the same for all individuals), (ii) each individual’s over-

all achievement is then transformed to that individual’s well-being, and (iii) the

measure of social well-being is taken to be the sum of all individuals’ well-beings.

It may be of interest to note that the construction of our measures of social well-

being resembles that of a prioritarian (or generalized utilitarian) social welfare

function discussed in the social choice literature (Blackorby et al., 2002; Parfit,

1997). In our framework of binary data, an individual’s achievement in a dimen-

sion is either 0 or 1. An achievement of 0 in a dimension can therefore be regarded

as non-achievement or deprivation in that dimension, and an achievement of 1 in

a dimension can be regarded as an absence of deprivation in that dimension. We

then take advantage of this close connection between an individual’s dimensional

achievement and dimensional deprivation and develop a new and intuitive way to

measure an individual’s overall deprivation from the individual’s overall achieve-

ment. Since we accept the intuition that, in our multidimensional framework, an

individual who has some dimensional deprivations, and, hence, some overall depri-

vation, may not necessarily be considered to be deprived and since we want to

2Though often referred to as multidimensional “poverty” in the literature, we choose to use the

term multidimensional deprivation, for two reasons. First, we define deprivation as lack of certain

achievements; a shortfall in these achievements may not necessarily translate into poverty. Second, the

notion of poverty in policy debates in the U.S. seems to be closely associated with either income poverty

or material hardship. We follow two of the recent empirical studies in the U.S., namely Dhongde and

Haveman (2017) and Mitra and Brucker (2017) who refer to their indices as multidimensional depriva-

tion measures rather than multidimensional poverty measures.