 The role of education and household composition for transitory and permanent income inequality–evidence from PSID dataJournal of Macroeconomics, 2015, vol. 46, issue C, 129-146 Abstract: Transitory and permanent shocks to income have been shown to be important determinants of household consumption. This paper shows that there are significant differences in the trends of transitory and permanent income inequality between demographic groups since the 1980s. Using data from the Panel Study of Income Dynamics, educational attainment and the composition of a household are found to play a key role. While permanent inequality increases steadily for educated households, it is flat over large parts of the sample period for the less educated households. Transitory inequality increases for all households headed by couples whereas it is constant for single households. Altogether, permanent shocks account for a larger part of the income variance of educated households whereas transitory shocks are relatively more important for the less educated. These results are able to shed light on the transmission of changes in income inequality to consumption inequality. Keywords: Income inequality; Transitory and permanent inequality; Income dynamics (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:46:y:2015:i:c:p:129-146 DOI: 10.1016/j.jmacro.2015.08.008 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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