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Trade-Off Between Consumption Growth and Inequality: Theory and Evidence for Germany

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  • Runli Xie

Abstract

This paper examines the structure and evolution of consumption and consumption growth inequality. Once heterogeneous agents relate their neighbors' consumption to their own, consumption volatility and inequality are affected. The relationship predicted between the group average consumption growth and within-group growth inequality was shown as only slightly positive yet significant using survey data from the German Socio- Economic Panel (GSOEP, 1984-2005). Age and household size are crucial for withingroup inequality, as young and/or small households are more sensitive to income and consumption shocks. Large and well-educated households with unskilled jobs have shown surprisingly inferior performance in consumption growth and variance. The data also shows increases of within-group inequality directly after the reunification and the introduction of the euro.

Suggested Citation

  • Runli Xie, 2009. "Trade-Off Between Consumption Growth and Inequality: Theory and Evidence for Germany," SFB 649 Discussion Papers SFB649DP2009-035, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    • Handle: RePEc:hum:wpaper:sfb649dp2009-035
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    More about this item

    Keywords

    Entry Regulation; Self-Employment; Occupational Mobility;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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