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From Earnings Inequality to Consumption Inequality

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Author Info

  • Orazio Attanasio

    (Universita degli Studi di Trento)

  • Gabriella Berloffa

    (Universita degli Studi di Trento)

  • Richard Blundell

    (University College London and Institute for Fiscal Studies)

  • Ian Preston

    (University College London and Institute for Fiscal Studies)

Abstract

This paper studies the paths from inequality in earnings to inequality in household consumption. We show that careful study of the evolution of the variances and covariances of earnings and consumption within cohorts across time can identify permanent and transitory shocks. We present an application to the evolution of inequality in the United Kingdom. We extend previous results to recognise separate earnings of partners in couples. Copyright Royal Economic Society 2002.

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Bibliographic Info

Article provided by Royal Economic Society in its journal Economic Journal.

Volume (Year): 112 (2002)
Issue (Month): 478 (March)
Pages: C52-C59

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Handle: RePEc:ecj:econjl:v:112:y:2002:i:478:p:c52-c59

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References

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  1. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  2. Slesnick, Daniel T, 1993. "Gaining Ground: Poverty in the Postwar United States," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 1-38, February.
  3. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-91, May.
  4. John Y. Campbell, 1992. "Intertemporal Asset Pricing Without Consumption Data," NBER Working Papers 3989, National Bureau of Economic Research, Inc.
  5. Moshe Buchinsky & Jennifer Hunt, 1999. "Wage Mobility In The United States," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 351-368, August.
  6. Richard Blundell & Ian Preston, 1998. "Consumption Inequality And Income Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 603-640, May.
  7. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  8. Orazio Attanasio & Gabriella Berloffa & Richard Blundell & Stephen Redding, 2002. "From wages to consumption inequality: tracking shocks," IFS Working Papers W02/20, Institute for Fiscal Studies.
  9. Mace, Barbara J, 1991. "Full Insurance in the Presence of Aggregate Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 928-56, October.
  10. David M. Cutler & Lawrence F. Katz, 1991. "Macroeconomic Performance and the Disadvantaged," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 1-74.
  11. Attanasio, Orazio & Davis, Steven J, 1996. "Relative Wage Movements and the Distribution of Consumption," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1227-62, December.
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Citations

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Cited by:
  1. Blundell, Richard & Pistaferri, Luigi & Saporta-Eksten, Itay, 2014. "Consumption inequality and family labor supply," Working Paper Series 1656, European Central Bank.
  2. John Pencavel, 2005. "A Life Cycle Perspective on Changes in Earnings Inequality Among Married Men and Women," Discussion Papers 04-036, Stanford Institute for Economic Policy Research.
  3. R. Alessie & A.S. Kalwij, 2003. "Permanent and transitory wage inequality of British men, 1975-2001: year, age and cohort effects," Working Papers 03-04, Utrecht School of Economics.
  4. Theloudis, Alexandros, 2011. "From income and consumption inequality to economic welfare inequality: the role of labor supply," MPRA Paper 37517, University Library of Munich, Germany.
  5. Heathcote, Jonathan & Storesletten, Kjetil & Violante, Giovanni L, 2004. "The Cross-Sectional Implications of Rising Wage Inequality in the United States," CEPR Discussion Papers 4296, C.E.P.R. Discussion Papers.
  6. John Sabelhaus & David Johnson & Stephen Ash & David Swanson & Thesia Garner & John Greenlees & Steve Henderson, 2013. "Is the Consumer Expenditure Survey Representative by Income?," NBER Working Papers 19589, National Bureau of Economic Research, Inc.
  7. Antonio Cutanda, 2002. "La medición de la desigualdad a través de un modelo de elección intertemporal," Hacienda Pública Española, IEF, vol. 163(4), pages 93-117, December.
  8. Heshmati, Almas, 2004. "A Review of Decomposition of Income Inequality," IZA Discussion Papers 1221, Institute for the Study of Labor (IZA).
  9. John Sabelhaus & David Johnson & Stephen Ash & David Swanson & Thesia Garner & John Greenlees & Steve Henderson, 2014. "Is the Consumer Expenditure Survey Representative by Income?," NBER Chapters, in: Improving the Measurement of Consumer Expenditures National Bureau of Economic Research, Inc.
  10. Emma Tominey, 2010. "The Timing of Parental Income and Child Outcomes: The Role of Permanent and Transitory Shocks," CEE Discussion Papers 0120, Centre for the Economics of Education, LSE.
  11. Adriaan S. Kalwij & Rob Alessie, 2007. "Permanent and transitory wages of British men, 1975-2001: year, age and cohort effects," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(6), pages 1063-1093.
  12. Athreya, Kartik & Tam, Xuan S. & Young, Eric R., 2009. "Unsecured credit markets are not insurance markets," Journal of Monetary Economics, Elsevier, vol. 56(1), pages 83-103, January.
  13. John Sabelhaus & David Johnson & Stephen Ash & Thesia Garner & John Greenlees & Steve Henderson & David Swanson, 2012. "Is the Consumer Expenditure Survey representative by income?," Finance and Economics Discussion Series 2012-36, Board of Governors of the Federal Reserve System (U.S.).
  14. Karen E. Dynan & Douglas W. Elmendorf & Daniel E. Sichel, 2006. "Financial innovation and the Great Moderation: what do household data say?," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.

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