Has Consumption Inequality Mirrored Income Inequality?

Mark Bils and Mark Aguiar
Additional contact information
Mark Aguiar: University of Rochester

No 1334, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: last 30 years has been mirrored by consumption inequality. We do so by constructing two alternative measures of consumption expenditure, using data from the Consumer Expenditure Survey (CE). We first use reports of active savings and after tax income to construct the measure of consumption implied by the budget constraint. We find that the consumption inequality implied by savings behavior tracks income inequality closely between 1980 and 2007. Second, we use a demand system to correct for systematic measurement error in the CE's expenditure data. Specifically, we consider trends in the relative expenditure of high income and low income households for different goods with different income elasticities. Our estimation exploits the difference in the growth rate of luxury consumption inequality versus necessity consumption inequality. This ``double-differencing,'' which we implement in a a regression framework, corrects for mis-measurement that can systematically vary over time by good and income group. This second exercise also indicates that consumption inequality has closely tracked income inequality over the period 1980-2007. Both of our measures show a significantly greater increase in consumption inequality than what is obtained from the CE's total household expenditure data directly.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (8)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Has Consumption Inequality Mirrored Income Inequality? (2015)
Working Paper: Has Consumption Inequality Mirrored Income Inequality? (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:red:sed010:1334

Access Statistics for this paper

More papers in 2010 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().