Consumption inequality and income uncertainty
AbstractThis paper places the debate over using consumption or income in studies of inequality growth in a formal intertemporal setting. It highlights the importance of permanent and transitory income uncertainty in the evaluation of growth in consumption inequality. We derive conditions under which the growth of variances and covariances of income and consumption can be used to separately identify the growth in the variance of permanent and transitory income shocks. Household data from Britain for the period 1968-1992 are used to show a strong growth in transitory inequality toward the end of this period, while younger cohorts are shown to face significantly higher levels of permanent inequality.
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Bibliographic InfoPaper provided by University College London in its series Open Access publications from University College London with number http://discovery.ucl.ac.uk/15770/.
Date of creation: May 1998
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Publication status: Published in Q J ECON (1998-05) v.113, p.603-640
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- Blundell, R & Preston, I, 1998.
"Consumption inequality and income uncertainty,"
Open Access publications from University College London
http://discovery.ucl.ac.u, University College London.
- Richard Blundell & Thomas M. Stoker, 1994.
"Consumption and the timing of income risk,"
IFS Working Papers
W94/09, Institute for Fiscal Studies.
- Orazio P. Attanasio & Tullio Jappelli, 2000. "The life cycle hypothesis and consumption inequality," IFS Working Papers W97/17, Institute for Fiscal Studies.
- Attanasio, Orazio P & Weber, Guglielmo, 1989. "Intertemporal Substitution, Risk Aversion and the Euler Equation for Consumption," Economic Journal, Royal Economic Society, vol. 99(395), pages 59-73, Supplemen.
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