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Consumption Inequality across Heterogeneous Families

Alexandros Theloudis ()

No 2021-04, LISER Working Paper Series from Luxembourg Institute of Socio-Economic Research (LISER)

Abstract: What does preference heterogeneity imply for consumption inequality? This paper studies the link from wage to consumption inequality within a lifecycle model of consumption and family labor supply. Its distinctive feature is that households have general heterogeneous preferences over consumption and labor supply. The paper shows identi?cation of the joint distribution of unobserved household preferences separately from the observed distributions of incomes and outcomes. Estimation on data from the Panel Study of Income Dynamics in the US reveals substantial unexplained heterogeneity in consumption preferences but little unexplained heterogeneity in labor supply preferences. Preference heterogeneity accounts for about a third of consumption inequality in recent years and implies, on average, lower partial insurance of wage shocks compared to recent studies in the literature.

Keywords: unobserved preference heterogeneity; family labor supply; lifecycle model; partial insurance; PSID (search for similar items in EconPapers)
JEL-codes: D12 D30 D91 E21 (search for similar items in EconPapers)
Pages: 104 pages
Date: 2021-05
New Economics Papers: this item is included in nep-ias and nep-mac
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Related works:
Journal Article: Consumption inequality across heterogeneous families (2021) Downloads
Working Paper: Consumption inequality across heterogeneous families (2017) Downloads
Working Paper: Consumption Inequality across Heterogeneous Families (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:irs:cepswp:2021-04

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