Has Consumption Inequality Mirrored Income Inequality?

Mark Aguiar and Mark Bils

American Economic Review, 2015, vol. 105, issue 9, 2725-56

Abstract: We revisit to what extent the increase in income inequality since 1980 was mirrored by consumption inequality. We do so by constructing an alternative measure of consumption expenditure using a demand system to correct for systematic measurement error in the Consumer Expenditure Survey. Our estimation exploits the relative expenditure of high- and low-income households on luxuries versus necessities. This double differencing corrects for measurement error that can vary over time by good and income. We find consumption inequality tracked income inequality much more closely than estimated by direct responses on expenditures. (JEL D31, D63, E21)

JEL-codes: D31 D63 E21 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20120599
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Citations: View citations in EconPapers (209)

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Related works:
Working Paper: Has Consumption Inequality Mirrored Income Inequality? (2011)
Working Paper: Has Consumption Inequality Mirrored Income Inequality? (2010)
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