Consumption Heterogenity Over the Business Cycle

Giacomo De Giorgi and Luca Gambetti

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: We study consumption heterogeneity over the business cycle. Using household panel data from 1984 to 2010 in the US we find that the welfare cost of the business cycle is non-negligible, once agents heterogeneity is taken into account, and sums to about 1% of yearly consumption. This is due to the structure of comovements between the different parts of the consumption distribution, in particular the tails are highly volatile and nega- tively related to each other. We also find that business cycle fluctuations originating from exogenous financial shocks only hit the top end of the consumption distribution and therefore reduce consumption inequality.

Keywords: Consumption; Heterogeneity; Aggregate Shocks; Structural Factor Model; FAVAR. (search for similar items in EconPapers)
JEL-codes: C3 D12 E21 E63 (search for similar items in EconPapers)
Pages: 54
Date: 2012-06-22
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Consumption Heterogeneity over the Business Cycle (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:904.12

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