Wealth and consumption inequality: an interquantile analysis

Juan Ignacio Martín-Legendre, Pablo Castellanos-García and José Manuel Sánchez-Santos

Applied Economic Analysis, 2020, vol. 28, issue 83, 133-151

Abstract: Purpose - The purpose of this paper is to analyze the changes in wealth and consumption inequality in Spain and estimate the consumption effects of housing and financial wealth. Design/methodology/approach - The estimations are made using micro-data from the Spanish Survey of Household Finances (2002–2014) applying cross-section, panel and interquartile techniques. Findings - The findings of this paper suggest that there was an increase in wealth inequality during the period under analysis and a reduction in consumption inequality. Also, the authors find a significant positive effect of wealth on consumer expenditure. Disaggregating by asset type, the value of the main residence is the category with the highest estimated effect on consumption, whereas the remaining types of assets, although still positive and generally significant, have more modest effects on consumption. However, the estimated coefficients and their significance can change substantially depending on the phase of the economic cycle and the position of the household in the income distribution. Originality/value - These results provide new empirical evidence on the effects of household wealth changes on their consumption behavior, the differences depending on the household's position in the distribution and the fluctuations of these estimated coefficients throughout a period of profound economic upheavals.

Keywords: Inequality; Consumption; Survey data; Wealth effect; Interquartile regressions; D31; E21 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:aeapps:aea-04-2020-0026

DOI: 10.1108/AEA-04-2020-0026

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