PRICE SEARCH, CONSUMPTION INEQUALITY AND EXPENDITURE INEQUALITY OVER THE LIFE ‐CYCLE

Yavuz Arslan, Bulent Guler and Temel Taskin

International Economic Review, 2021, vol. 62, issue 1, 295-320

Abstract: We differentiate consumption from expenditure by incorporating price search decision into an otherwise standard life‐cycle model. We first analytically show that, under very general conditions, poorer households search more and pay lower prices compared to wealthier ones. As a result, consumption inequality is smaller than expenditure inequality, and the gap between them increases over the life‐cycle. Next, using a plausibly calibrated model, we find that life‐cycle increase in consumption inequality is about 30% lower than the increase in expenditure inequality. Price search provides an insurance mechanism against income shocks and increases the welfare of a newborn by 3.9%.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1111/iere.12488

Related works:
Working Paper: Price search, consumption inequality, and expenditure inequality over the life-cycle (2020)
Working Paper: Price Search, Consumption Inequality, and Expenditure Inequality over the Life Cycle (2016)
Working Paper: Price Search, Consumption Inequality, and Expenditure Inequality over the Life Cycle (2014)
Working Paper: Price Search, Consumption Inequality, and Expenditure Inequality over the Life Cycle (2012)
Working Paper: Price search, consumption inequality, and expenditure inequality over the life cycle (2011)
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:wly:iecrev:v:62:y:2021:i:1:p:295-320

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598

Access Statistics for this article

International Economic Review is currently edited by Michael O'Riordan and Dirk Krueger

More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().