Business Cycle Fluctuations and the Distribution of Consumption

Luca Gambetti and Giacomo De Giorgi

No 10319, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper sheds new light on the interactions between business cycles and the consumption distribution. We use CEX consumption data and a factor model to characterize the cyclical dynamics of the consumption distribution. We first establish that our approach is able to closely match business cycle fluctuations of consumption from the National Account. We then study the responses of the consumption distribution to TFP shocks and economic policy uncertainty shocks. Importantly, we find that the responses of the right tail of the consumption distribution, mostly comprising higher educated individuals, to shocks that drive cyclical fluctuations are larger and quicker than in other parts of the distribution. We note that the cost of business cycle fluctuations is larger than the one found using aggregate consumption, and that the shocks we analyze reduce consumption inequality on impact.

Keywords: Consumption; Inequality (search for similar items in EconPapers)
JEL-codes: C3 D12 E21 E63 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP10319 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Business Cycle Fluctuations and the Distribution of Consumption (2017)
Working Paper: Business cycle fluctuations and the distribution of consumption (2015)
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:cpr:ceprdp:10319

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP10319

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().