Business Cycle Fluctuations and the Distribution of Consumption

Giacomo De Giorgi and Luca Gambetti

Review of Economic Dynamics, 2017, vol. 23, 19-41

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 ensure that our approach closely matches business cycle fluctuations of consumption from the National Account. We then study the responses of the consumption distribution to TFP and uncertainty shocks. Importantly, we find that the right tail of the consumption distribution, comprised mostly of highly educated individuals, has a larger and quicker response than other parts of the distribution to shocks that drive cyclical fluctuations. We note that the cost of business cycle fluctuations, calculated using the full distribution of consumption, is larger than the cost found using aggregate consumption. Further, the shocks we analyze reduce consumption inequality on impact. (Copyright: Elsevier)

Keywords: Consumption; Inequality; Cost of business cycles; Heterogeneity; Aggregate Shocks; Structural Factor Model; FAVAR (search for similar items in EconPapers)
JEL-codes: C3 D12 E21 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
https://dx.doi.org/10.1016/j.red.2016.07.005
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See https://www.sciencedirect.com/ for details.

Related works:
Software Item: Code and data files for "Business Cycle Fluctuations and the Distribution of Consumption" (2016)
Working Paper: Business cycle fluctuations and the distribution of consumption (2015)
Working Paper: Business Cycle Fluctuations and the Distribution of Consumption (2014)
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:red:issued:15-239

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2016.07.005

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().