Consumption Inequality and Partial Insurance

Richard Blundell (), Luigi Pistaferri and Ian Preston

American Economic Review, 2008, vol. 98, issue 5, 1887-1921

Abstract: This paper examines the link between income and consumption inequality. We create panel data on consumption for the Panel Study of Income Dynamics using an imputation procedure based on food demand estimates from the Consumer Expenditure Survey. We document a disjuncture between income and consumption inequality over the 1980s and show that it can be explained by changes in the persistence of income shocks. We find some partial insurance of permanent shocks, especially for the college educated and those near retirement. We find full insurance of transitory shocks except among poor households. Taxes, transfers, and family labor supply play an important role in insuring permanent shocks. (JEL D12, D31, D91, E21)

JEL-codes: D12 D31 D91 E21 (search for similar items in EconPapers)
Date: 2008
Note: DOI: 10.1257/aer.98.5.1887
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Citations: View citations in EconPapers (636)

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Working Paper: Consumption inequality and partial insurance (2004)
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