Mapping Educational Disparities in Life-Cycle Consumption

Arbeitspapier

This paper uses data taken from the tax returns of all Icelandic taxpayers in 2005-2019, a period that saw large changes in disposable income around the country's financial crisis in 2008, to plot the life-cycle path of consumption and income for different education groups and to estimate the level of consumption smoothing. We split households into three groups based on educational attainment: primary education, secondary school, and university. We find that the university educated engage in more consumption smoothing than those without a university degree. We also construct a measure for marginal propensity to consume (MPC) out of transitory income and find that the university educated tend to have a lower MPC than those with less education. This implies that investing in education is an investment not only in higher income and sometimes more fulfilling jobs but also a more stable standard of living. There is a corollary that a higher level of average education can be expected to reduce the magnitude of the business cycle through a lower multiplier.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9855

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
• Subject: education ; consumption ; inequality

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jensen, Svend E. Hougaard ; Olafsson, Sigurdur P. ; Sveinsson, Thorsteinn Sigurdur ; Zoega, Gylfi
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/263785
• Last update: 10.03.2025, 11:42 AM CET