IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Consumption Inequality and Intra-household Allocations

  • Jeremy Lise
  • Shannon Seitz

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. To illustrate this point, we use a collective model of household behaviour to estimate consumption inequality in the U.K. from 1968 to 2001. First, the use of adult equivalence scales underestimates the initial level of cross-sectional consumption inequality by 50%, as large differences in the earnings of husbands and wives translate into large differences in consumption allocations within households. Second, we estimate the rise in between-household inequality has been accompanied by an offsetting reduction in within-household inequality. Our findings also indicate that increases in marital sorting on wages and hours worked can simultaneously explain two-thirds of the decline in within-household inequality and between a quarter and one-half of the rise in between-household inequality for one and two adult households. Copyright 2011, Oxford University Press.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1093/restud/rdq003
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 78 (2011)
Issue (Month): 1 ()
Pages: 328-355

as
in new window

Handle: RePEc:oup:restud:v:78:y:2011:i:1:p:328-355
Contact details of provider:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Blundell, Richard & Chiappori, Pierre-André & Magnac, Thierry & Meghir, Costas, 2005. "Collective Labour Supply: Heterogeneity and Nonparticipation," IZA Discussion Papers 1785, Institute for the Study of Labor (IZA).
  2. Krueger, Dirk & Perri, Fabrizio, 2005. "Does income inequality lead to consumption inequality? Evidence and theory," CFS Working Paper Series 2005/15, Center for Financial Studies (CFS).
  3. M. Browning & P. A. Chiappori, 1998. "Efficient Intra-Household Allocations: A General Characterization and Empirical Tests," Econometrica, Econometric Society, vol. 66(6), pages 1241-1278, November.
  4. Haddad, Lawrence & Kanbur, Ravi, 1989. "How serious is the neglect of intrahousehold inequality ?," Policy Research Working Paper Series 296, The World Bank.
  5. Garry Barrett & Thomas Crossley & Christopher Worswick, 1999. "Consumption and Income Inequality in Australia," CEPR Discussion Papers 404, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  6. Kanbur, Ravi & Haddad, Lawrence, 1994. "Are Better Off Households More Unequal or Less Unequal?," Oxford Economic Papers, Oxford University Press, vol. 46(3), pages 445-58, July.
  7. Frederic Vermeulen, 2000. "Collective household models: principles and main results," Public Economics Working Paper Series ces0028, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
  8. Martin Browning & Pierre-André Chiappori & Arthur Lewbel, . "Estimating Consumption Economies of Scale, Adult Equivalence Scales, and Household Bargaining Power," CAM Working Papers 2003-12, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics, revised Dec 2003.
  9. Browning, M. & Bourguignon, F. & Chiappori, P.A. & Lechene, V., 1992. "Incomes and Outcomes: A structural Model of Intra-Household Allocation," DELTA Working Papers 92-23, DELTA (Ecole normale supérieure).
  10. Fernandez, R. & Rogerson, R., 1999. "Sorting and Long-Run Inequality," Working Papers 99-22, C.V. Starr Center for Applied Economics, New York University.
  11. Thomas F. Crossley & Krishna Pendakur, 2002. "Consumption Inequality," Department of Economics Working Papers 2002-09, McMaster University.
  12. Chiappori, Pierre-André & Fortin, Bernard & Lacroix, Guy, 2001. "Marriage Market, Divorce Legislation and Household Labor Supply," Cahiers de recherche 0103, Université Laval - Département d'économique.
  13. Jay H. Hong & Jose-Victor Rios-Rull, 2004. "Life insurance and household consumption," Working Papers 04-10, Federal Reserve Bank of Philadelphia.
  14. Richard Blundell & Ian Preston, 1998. "Consumption Inequality And Income Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 603-640, May.
  15. repec:cup:cbooks:9780521296762 is not listed on IDEAS
  16. Shannon N. Seitz, 2002. "Accounting for Racial Differences in Marriage and Employment," Working Papers 1009, Queen's University, Department of Economics.
  17. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-85, November.
  18. Erich Battistin, 2002. "Errors in Survey Reports of Consumption Expenditures," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C4-2, International Conferences on Panel Data.
  19. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  20. Richard Blundell & Pierre-Andr� Chiappori & Costas Meghir, 2005. "Collective Labor Supply with Children," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1277-1306, December.
  21. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2.
  22. Orazio Attanasio & Erich Battistin & Hidehiko Ichimura, 2004. "What Really Happened to Consumption Inequality in the US?," NBER Working Papers 10338, National Bureau of Economic Research, Inc.
  23. Olivier Donni, 2007. "Collective female labour supply: theory and application," Economic Journal, Royal Economic Society, vol. 117(516), pages 94-119, 01.
  24. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  25. Manser, Marilyn & Brown, Murray, 1980. "Marriage and Household Decision-Making: A Bargaining Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 31-44, February.
  26. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:78:y:2011:i:1:p:328-355. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.