Consumption Inequality in the Digital Age

Arvai Kai and Mann Katja

Working papers from Banque de France

Abstract: This paper studies how digitalization affects consumption inequality. We assemble a novel dataset of digital technology used in the production process, link it to US consumption data and establish a new stylized fact: High-income households consume a higher share of digitally produced products than low-income households. Building on this finding, we present a structural model in which digitalization affects consumption inequality in two ways: By a polarization of incomes and by a decline in the relative price of digitally produced goods. Both channels work in favour of high-income households. Calibrating the model to the US economy between 1960 and 2017, we demonstrate that the price channel has sizeable welfare effects and contributes the increase in consumption inequality that is caused by the effect of digitalization by around 25%.

Keywords: Digitalization; Inequality; Consumption; Income (search for similar items in EconPapers)
JEL-codes: E21 E22 J31 O33 O41 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://publications.banque-france.fr/sites/defaul ... /documents/wp890.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:890

Access Statistics for this paper

More papers in Working papers from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart ().