4.4 Assets

This section describes the asset and debt questions asked of NLSY79 respondents since the cohort’s inception in 1979. While many researchers use income as the primary measure of economic resources available to a respondent, examining both income and wealth provides a more complete picture of economic well-being for the NLSY79.  Wealth, which is equal to a respondent’s assets minus their debts, shows another dimension of the resources available to the respondent.  The NLSY79 cohort is a unique source of wealth information.  Because the original NLSY79 panel contains a supplemental sample of 5,295 blacks, Hispanics or Latinos, and economically disadvantaged non-black/non-Hispanics, researchers are able to precisely measure wealth for low-income and minority households.  For more information, see Zagorsky (1997).

Data Summary: From the first survey year, NLSY79 respondents have been asked about their savings, home, and vehicle ownership.  Over the course of the survey, these questions, shown in Table 4.4.1, provide information on when saving begins, how savings habits are formed, and how persistent savings habits are.

Table 4.4.1 NLSY79 Asset Questions 1979 to 1984

Each of the first four surveys (1979, 1980, 1981, and 1982) contain identical sets of questions asking if the respondent or their spouse had any money set aside for savings, owned a vehicle, or owned their own home.  Unfortunately, the respondent was never asked how much savings were held, the value or number of vehicles, or the value of, and mortgage on, their home.  Additionally, between 1979 and 1982, NLSY79 respondents were only asked questions on assets if they met one of following five criteria:

1. 18 years old or greater,
2. had a child,
3. enrolled in college,
4. married, or
5. living outside their parents' home.

This selection process eliminated many respondents from these questions.  Early NLSY79 data show that few individuals answered the questions until they turned 18 years old.  For example, in 1979 only five percent of those interviewed under age 18 answered the asset questions.  Except for the question on home ownership, asset questions were dropped during 1983 and 1984.  Beginning in 1985, when all respondents had turned 18, NLSY79 respondents were administered a much larger wealth section.  As Table 4.4.2 shows, respondents were given the opportunity to answer approximately 20 questions about a variety of asset and debt holdings.  In most years respondents estimated how much their home, cash savings, stock and bond portfolio, estate, business, and automobile were worth.  Additionally, respondents estimated how much mortgage debt, property debt, and other debt they had accumulated.  Together these variables provide a rough overview of the net worth of each respondent.  As the cohort has aged, the wealth section has grown in length and detail.

The only major change in the wealth series occurred in 1991 and 2002.  Budgetary restrictions resulted in the elimination of wealth questions for these rounds.

Table 4.4.2 NLSY79 Asset Questions 1985 to 2004¹

Nonresponse: One major concern when asking individuals about their wealth holdings is nonresponse bias.  While it is outside the scope of this chapter to fully investigate nonresponse bias of the NLSY79 cohort, this section briefly describes nonresponse in 1992 as an example of the issues raised.  There are two primary types of questions on wealth:  general questions asking whether the respondent has a particular asset or debt, and specific questions asking about the value of holdings.  Factors that are likely to contribute to nonresponse are suspicion, uncertainty about an asset’s current value, shared responsibility for family finances, and complex financial arrangements.

Table 4.4.3 provides information on response rates to questions on wealth in the 1992 NLSY79 survey.  The NLSY79 has very high response rates on the ownership questions—generally exceeding 99 percent.  The responses in the amount column are based only on individuals who stated they owned the particular asset or had the particular debt.  This column shows that response rates are relatively low for items where the current values may be uncertain or variable, notably stock holdings and business interests.

For more information on item nonresponse, refer to Chapter 5 in this User's Guide.

Table 4.4.3 Response Rates to Questions on Wealth: 1992

Top Coding: Because the NLSY79 is a public use data set that is distributed widely throughout the research and public policy communities, the survey takes extensive measures to protect the confidentiality of respondents.  One method of ensuring confidentiality is to “top code” unusually high values.

The NLSY79 has used three top coding algorithms for assets.  From 1979 to 1988, every NLSY79 asset question that elicited a response above a specified cutoff value, such as $100,000 for some income variables, was recoded to the truncation value plus one dollar, such as $100,001.  Unfortunately this algorithm results in a sharp downward bias in the mean value of NLSY79 asset holdings since the entire right hand tail is truncated.  To address this problem, beginning in 1989, a new algorithm was implemented.  The new top code algorithm replaces all values above the cutoff with the average of all outlying values.

Beginning in 1996, the top two percent of respondents with valid values were identified.  Values within that top range were averaged and that averaged value replaced all values in the top range.

Table 4.4.4 Number and Percentage of Respondents Whose Assets Were Top Coded in 1985 and 1993

A second out-of-range issue with NLSY79 data concerns individuals living outside the United States.  Residing outside the United States does not preclude a respondent from being interviewed.  For example, in 1992, 125 respondents lived abroad.  Between 1989 and 1992, for people who hold assets denominated in foreign currency, little effort was made to transform these assets into dollar figures.  Instead, such values are classified as “invalid skips” in the data.  Beginning in 1993, an effort was made to convert these currencies whenever the unit of the response could be determined.  While readers are warned that this occurs, relatively few respondents live outside the United States.  Moreover, only a small number of individuals in this group cannot report their wealth in U.S. dollars.

Created Values and Summary Statistics: The CHRR staff has not created any summary wealth values for this cohort as it has for other cohorts.  Moreover, due to the low response rates for a number of questions, a CHRR summary variable would contain a number of missing observations.  Users seeking to create their own summary statistics should not be surprised to find that a significant fraction of the sample reports no wealth holdings in any given survey.  Additionally, users creating their own summary variable will find a significant number of individuals with negative net wealth holdings.

Survey Instruments: Questions pertaining to assets are found in the “Income and Assets” section of the NLSY79 questionnaire beginning with 1985.  Specifically, Section 11 (1993), Section 12 (1987, 1989, 1990, 1992), Section 13 (1986 and 1994–2004), Section 14 (1985), and Section 15 (1988) contain these questions.

Data Files: Data are found primarily within the “Asset” area of interest in the NLSY79 data set.

Comparison to Other NLS Cohorts: Information on assets has been regularly collected from each cohort (except for NLSY79 children under age 15).  Users should note, however, that the assets included have varied widely over time and among cohorts.  Data on the respondent’s debts have been collected from each cohort on a less regular basis.  For more details, including specific years, consult the BLS website at http://www.bls.gov/nls or the appropriate cohort’s User’s Guide.

References

Englehart, Gary V. “Income and Wealth in the NLSY79.” Paper presented at the NLSY79 Redesign Workshop, Bureau of Labor Statistics, Washington D.C., September 1998.

Zagorsky, Jay L.  “The NLSY79 Wealth Data Evaluation.”  Columbus, OH:  CHRR, The Ohio State University, 1997.

Zagorsky, Jay L. “Young Baby Boomers’ Wealth.” Review of Income and Wealth, Series 45, Number 2, June 1999, 135–156.