Abstract

This study extends traditional methods of measuring real household consumption, which typically deflate household expenditure using a common Consumer Price Index (CPI). It introduces two key innovations by utilizing detailed microdata on household expenditures: First, it considers heterogeneity in household characteristics when calculating price indices, specifically incorporating age differences into the Törnqvist indices. Since the introduction of free childcare in October 2019, young households have shown significant drops in their Törnqvist index, suggesting that deflating nominal expenditures using a common price index underestimates real expenditures, especially in light of targeted policies like childcare. Secondly, the paper addresses the gap between expenditure amounts and actual consumption by including real consumption of medical services in its calculations. Since the self-payment ratio for medical services varies significantly by age, using only out-of-pocket expenses leads to substantial measurement errors. By integrating data on national healthcare expenses, this analysis reveals that while conventional methods show a decline in the real consumption of young households from 2005 to 2021, including real actual medical consumption shows an increase, underscoring the importance of considering actual consumption in economic welfare assessments.