Consumption Growth and Inequality in a Heterogeneous Agent Model: Theory and Evidence from German Data

Konferenzbeitrag

This paper studies the structure and dynamics of consumption and consumption growth inequality. The theoretical framework is a heterogeneous agent model with stochastic labor endowments, where the group mean consumption serves as consumption externality. The main finding is that households' preferences affect the within-group inequality through asset holding decisions: it decreases with groups' degree of patience, and increases with households' eagerness to keep up with the group average. The relationship between the group average consumption growth and within-group inequality predicted by the model is shown as slightly positive yet significant in a synthesis study combining the German Socio-Economic Panel (GSOEP) and the Einkommens- und Verbrauchsstichprobe (EVS). Age and household size are crucial for within-group inequality, as young and/or small households are more sensitive to income and consumption shocks. Large and well-educated households with unskilled jobs have undergone surprisingly inferior performance in consumption growth and growth variance. Moreover, the data also shows increases of within-group inequality directly after the reunification and the introduction of the euro.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Distribution and Redistribution ; No. F14-V2

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Personal Income, Wealth, and Their Distributions
• Subject: consumption inequality ; consumption growth ; German Socio-Economic Panel ; EVS

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Xie, Runli
• Event: Veröffentlichung
• (who): Verein für Socialpolitik
• (where): Frankfurt a. M.
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/37365
• Last update: 10.03.2025, 11:44 AM CET