EconPapers    
Economics at your fingertips  
 

Why is consumption more log normal than income? Gibrat's law revisited

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

No W07/08, IFS Working Papers from Institute for Fiscal Studies

Abstract: Significant departures from log normality are observed in income data, in violation of Gibrat's law. We identify a new empirical regularity, which is that the distribution of consumption expenditures across households is, within cohorts, closer to log normal than the distribution of income. We explain these empirical results by showing that the logic of Gibrat's law applies not to total income, but to permanent income and to maginal utility. These findings have important implications for welfare and inequality measurement, aggregation, and econometric model analysis.

Date: 2007-07-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15) Track citations by RSS feed

Downloads: (external link)
http://www.ifs.org.uk/wps/wp0708.pdf (application/pdf)

Related works:
Journal Article: Why Is Consumption More Log Normal than Income? Gibrat's Law Revisited (2009) Downloads
Working Paper: Why is Consumption More Log Normal Than Income? Gibrat's Law Revisited (2007) Downloads
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:ifs:ifsewp:07/08

Ordering information: This working paper can be ordered from
The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE

Access Statistics for this paper

More papers in IFS Working Papers from Institute for Fiscal Studies The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE. Contact information at EDIRC.
Bibliographic data for series maintained by Emma Hyman ().

 
Page updated 2020-05-29
Handle: RePEc:ifs:ifsewp:07/08