Income Shocks or Insurance - What Determines Consumption Inequality?

Arbeitspapier

Contrary to the implications of economic theory, consumption inequality in the US did not react to the increases in income inequality during the last three decades. This paper investigates if a change in the type of income inequality - from permanent to transitory - or a change in the ability to insure income shocks is responsible for this. A measure of household consumption is imputed into the Panel Study of Income Dynamics to create panel data on income and consumption for the period 1980-2010. The minimum distance investigation of covariance relationships shows that both explanations work together: the share of transitory shocks increases over time, but the capability to insure permanent and transitory shocks to income also improves. Together, these phenomena can explain the lack of an increase in consumption inequality.

Object Details

• ISBN: 978-3-86788-628-4
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Ruhr Economic Papers ; No. 550

Classification and Topics

• Classification: Wirtschaft ; Consumer Economics: Empirical Analysis ; Personal Income, Wealth, and Their Distributions ; Macroeconomics: Consumption; Saving; Wealth
• Subject: consumption inequality ; income inequality ; consumption insurance

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ludwig, Johannes
• Event: Veröffentlichung
• (who): Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)
• (where): Essen
• (when): 2015

Further information

• DOI: doi:10.4419/86788628
• Handle: http://hdl.handle.net/10419/110342
• Last update: 10.03.2025, 11:43 AM CET