Consumption Inequality, Income Uncertainty and Insurance
AbstractThis paper uses panel data on household consumption and income to describe the transmission of income inequality into consumption inequality. We do this by contrasting shifts in the cross-sectional distribution of income growth with shifts in the cross-sectional distribution of consumption growth. Our aim is to evaluate the time series pattern of permanent income inequality and to assess the degree of insurance. We combine panel data on income from the PSID with consumption data from repeated CEX cross-sections. The results point to some partial insurance but reject the complete market restrictions. We find a greater degree of insurance for transitory shocks and differences in the degree of insurance over time and across demographic groups. We also document the importance of durables and of taxes and transfers as a means of insurance
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 215.
Date of creation: 2004
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
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Consumption Dynamics; Income Shocks; Inequality; Insurance;
Find related papers by JEL classification:
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
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- I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
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