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The Influence of Demographics and Household-Specific Price Indices on Consumption-Based Inequality and Welfare: A Comparison of Spain and the United States

Author

Listed:
  • Thesia I. Garner

    () (Division of Price and Index Number Research, U.S. Department of Labor, Bureau of Labor Statistics)

  • Javier Ruiz-Castillo

    () (Departamento de Economía, Universidad Carlos III)

  • Mercedes Sastre

    () (Departamento de Economía Aplicada VI)

Abstract

Previous research has suggested that inequality is lower in Spain than in the United States when it is based on income. For the present article, both inequality and social welfare are examined, with household consumption expenditures used as a proxy for household welfare. For tractability, equivalence scales depended only on the number of people in the household. Household-specific price indices were used to express the 1990–1991 expenditure distributions in 1981 and 1991 winter prices. Our results reveal that inequality and welfare comparisons are drastically different for smaller and larger households. When all households are considered, the two-country comparison suggests that the income inequality ranking can only be maintained for expenditure distributions when economies of scale are small or nonexistent. However, welfare is always higher in the United States than in Spain. Because inflation during the 1980s in both countries was essentially distributionally neutral, all results appear to be robust to the choice of time period.

Suggested Citation

  • Thesia I. Garner & Javier Ruiz-Castillo & Mercedes Sastre, 2003. "The Influence of Demographics and Household-Specific Price Indices on Consumption-Based Inequality and Welfare: A Comparison of Spain and the United States," Southern Economic Journal, Southern Economic Association, vol. 70(1), pages 22-48, July.
  • Handle: RePEc:sej:ancoec:v:70:1:y:2003:p:22-48
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    Cited by:

    1. Ruiz-Castillo, Javier & Ley, Eduardo & Izquierdo, Mario, 2002. "Distributional aspects of the quality change bias in the CPI: evidence from Spain," Economics Letters, Elsevier, vol. 76(1), pages 137-144, June.
    2. repec:ebl:ecbull:v:4:y:2002:i:3:p:1-5 is not listed on IDEAS
    3. Ruiz-Castillo, Javier, 2005. "Relative and absolute poverty : the case of México, 1992-2004," UC3M Working papers. Economics we061103, Universidad Carlos III de Madrid. Departamento de Economía.

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