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Why Is Consumption More Log Normal than Income? Gibrat's Law Revisited

Erich Battistin (), Richard Blundell and Arthur Lewbel ()

Journal of Political Economy, 2009, vol. 117, issue 6, 1140-1154

Abstract: Significant departures from log normality are observed in income data, in violation of Gibrat's law. We show empirically that the distribution of consumption expenditures across households is, within cohorts, closer to log normal than the distribution of income. We explain this empirical result by showing that the logic of Gibrat's law applies not to total income, but to permanent income and to marginal utility. (c) 2009 by The University of Chicago. All rights reserved.

Date: 2009
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Working Paper: Why is Consumption More Log Normal Than Income? Gibrat's Law Revisited (2007) Downloads
Working Paper: Why is consumption more log normal than income? Gibrat's law revisited (2007) Downloads
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Handle: RePEc:ucp:jpolec:v:117:y:2009:i:6:p:1140-1154