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Inequality in 3‐D: Income, Consumption, and Wealth

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  • Jonathan D. Fisher
  • David S. Johnson
  • Timothy M. Smeeding
  • Jeffrey P. Thompson

Abstract

We do not need to and should not have to choose amongst income, consumption, or wealth as the superior measure of well‐being. All three individually and jointly determine well‐being. We are the first to study inequality in three conjoint dimensions for the same households, using income, consumption, and wealth from the 1989–2016 Surveys of Consumer Finances (SCF). The paper focuses on two questions. What does inequality in two and three dimensions look like? Has inequality in multiple dimensions increased by less, by more, or by about the same as inequality in any one dimension? We find an increase in inequality in two dimensions and in three dimensions, with a faster increase in multi‐dimensional inequality than in one‐dimensional inequality. Viewing inequality through one dimension greatly understates the level and the growth in inequality in two and three dimensions. The U.S. is becoming more economically unequal than is generally understood.

Suggested Citation

  • Jonathan D. Fisher & David S. Johnson & Timothy M. Smeeding & Jeffrey P. Thompson, 2022. "Inequality in 3‐D: Income, Consumption, and Wealth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(1), pages 16-42, March.
    • Handle: RePEc:bla:revinw:v:68:y:2022:i:1:p:16-42
    DOI: 10.1111/roiw.12509
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    Cited by:

    1. Krueger, D. & Mitman, K. & Perri, F., 2016. "Macroeconomics and Household Heterogeneity," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 843-921, Elsevier.
    2. Fisher, Jonathan D. & Johnson, David S. & Smeeding, Timothy M. & Thompson, Jeffrey P., 2020. "Estimating the marginal propensity to consume using the distributions of income, consumption, and wealth," Journal of Macroeconomics, Elsevier, vol. 65(C).
    3. Pawel Bukowski & Filip Novokmet, 2019. "Between communism and capitalism: long-term inequality in Poland, 1892-2015," CEP Discussion Papers dp1628, Centre for Economic Performance, LSE.
    4. Pawel Bukowski & Filip Novokmet, 2019. "Between Communism and Capitalism: Long-Term Inequality in Poland, 1892- 2015," World Inequality Lab Working Papers hal-02876995, HAL.
    5. Osborne Jackson, 2019. "The impact of migration on earnings inequality in New England," New England Public Policy Center Research Report 19-2, Federal Reserve Bank of Boston.
    6. Cao, Jing & Ho, Mun S. & Hu, Wenhao & Jorgenson, Dale, 2020. "Estimating flexible consumption functions for urban and rural households in China," China Economic Review, Elsevier, vol. 61(C).
    7. Osborne Jackson, 2018. "The impact of migration on earnings inequality," Working Papers 19-5, Federal Reserve Bank of Boston.
    8. Bukowski, Pawel & Novokmet, Filip, 2019. "Between communism and capitalism: long-term inequality in Poland, 1892-2015," LSE Research Online Documents on Economics 102834, London School of Economics and Political Science, LSE Library.

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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