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Consumption Inequality and Intra-Household Allocations

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  • Jeremy Lise

    (Queen's University)

  • Shannon Seitz

    (Queen's University)

Abstract

The consumption literature uses adult equivalence scales to measure individual level inequality. This practice imposes the assumption that there is no within household inequality. In this paper, we show that ignoring consumption inequality within households produces misleading estimates of inequality along two dimensions. First, the use of adult equivalence scales underestimates the level of cross sectional consumption inequality by 30%. This result is driven by the fact that large differences in the earnings of husbands and wives translate into large differences in consumption allocations within households. Second, the rise in inequality since the 1970s is overstated by two-thirds: within house-hold inequality declined over time as the share of income provided by wives increased. Our findings also indicate that increases in marital sorting on wages and hours worked can simultaneously explain virtually all of the decline in within household inequality and a substantial fraction of the rise in between household inequality for one and two adult households in the UK since the 1970s.

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Bibliographic Info

Paper provided by EconWPA in its series Labor and Demography with number 0504001.

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Length: 40 pages
Date of creation: 08 Apr 2005
Date of revision:
Handle: RePEc:wpa:wuwpla:0504001

Note: Type of Document - pdf; pages: 40
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Web page: http://128.118.178.162

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Keywords: Collective Model; Consumption Inequality; Marital Sorting; Adult Equivalence Scales;

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References

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  3. Pierre-André Chiappori & Richard Blundell & Costas Meghir, 2002. "Collective labour supply with children," IFS Working Papers W02/08, Institute for Fiscal Studies.
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  8. Shannon Seitz, 2009. "Accounting for Racial Differences in Marriage and Employment," Journal of Labor Economics, University of Chicago Press, vol. 27(3), pages 385-437, 07.
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  24. Pendakur, Krishna, 1998. "Changes in Canadian Family Income and Family Consumption Inequality between 1978 and 1992," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(2), pages 259-83, June.
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