Does income inequality lead to consumption inequality? evidence and theory
- Using data from the Consumer Expenditure Survey we first document that the recent increase in income inequality in the US has not been accompanied by a corresponding rise in consumption inequality. Much of this divergence is due to different trends in within-group inequality, which has increased significantly for income but little for consumption. We then develop a simple framework that allows us to analytically characterize how within-group income inequality affects consumption inequality in a world in which agents can trade a full set of contingent consumption claims, subject to endogenous constraints emanating from the limited enforcement of intertemporal contracts (as in Kehoe and Levine, 1993). Finally, we quantitatively evaluate, in the context of a calibrated general equilibrium production economy, whether this set-up, or alternatively a standard incomplete markets model (as in Ayiagari 1994), can account for the documented stylized consumption inequality facts from the US data. JEL Klassifikation: E21, D91, D63, D31, G22
Author: | Dirk KruegerORCiDGND, Fabrizio Perri |
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URN: | urn:nbn:de:hebis:30-10912 |
Parent Title (German): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2005,15 |
Series (Serial Number): | CFS working paper series (2005, 15) |
Document Type: | Working Paper |
Language: | English |
Year of Completion: | 2005 |
Year of first Publication: | 2005 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2005/06/13 |
Tag: | Consumption Inequality; Limited Enforcement; Risk Sharing |
GND Keyword: | Einkommensunterschied; Verbrauch |
Issue: | May 2005 |
HeBIS-PPN: | 197172784 |
Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Licence (German): | Deutsches Urheberrecht |