Has consumption inequality mirrored income inequality?

Mark Aguiar, Mark Bils

Research output: Contribution to journalReview articlepeer-review

86 Scopus citations

Abstract

We revisit to what extent the increase in income inequality since 1980 was mirrored by consumption inequality. We do so by constructing an alternative measure of consumption expenditure using a demand system to correct for systematic measurement error in the Consumer Expenditure Survey. Our estimation exploits the relative expenditure of high- And low-income households on luxuries versus necessities. This double differencing corrects for measurement error that can vary over time by good and income. We find consumption inequality tracked income inequality much more closely than estimated by direct responses on expenditures.

Original languageEnglish (US)
Pages (from-to)2725-2756
Number of pages32
JournalAmerican Economic Review
Volume105
Issue number9
DOIs
StatePublished - Sep 1 2015

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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