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Does income inequality affect aggregate consumption? Revisiting the evidence

Author

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  • Jesus Crespo Cuaresma

    (Vienna University of Economics and Business
    Wittgenstein Center for Demography and Global Human Capital (IIASA,VID/OEAW,WU)
    International Institute of Applied Systems Analysis (IIASA)
    Austrian Institute of Economic Research (WIFO))

  • Jozef Kubala

    (University of Economics in Bratislava)

  • Kristina Petrikova

    (University of Economics in Bratislava)

Abstract

The standard Keynesian view predicts that equalization of the income distribution leads to an increase in aggregate consumption. We revisit the analysis carried out by the seminal empirical contributions which test such a hypothesis using modern econometric methods and the most comprehensive dataset existing on income distribution measures. Our results indicate that there is no empirical evidence of a negative effect of income inequality on aggregate consumption.

Suggested Citation

  • Jesus Crespo Cuaresma & Jozef Kubala & Kristina Petrikova, 2018. "Does income inequality affect aggregate consumption? Revisiting the evidence," Empirical Economics, Springer, vol. 55(2), pages 905-912, September.
    • Handle: RePEc:spr:empeco:v:55:y:2018:i:2:d:10.1007_s00181-017-1302-x
    DOI: 10.1007/s00181-017-1302-x
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    Cited by:

    1. Rude, Johanna, 2024. "Income Inequality and Aggregate Demand," MPRA Paper 120875, University Library of Munich, Germany.
    2. Kohlscheen, Emanuel & Lombardi, Marco & Zakrajšek, Egon, 2021. "Income Inequality and the depth of economic downturns," Economics Letters, Elsevier, vol. 205(C).
    3. T. Y. Ivakhnenko & A. V. Polbin, 2022. "Income Inequality and Propensity to Consume in Russia’s Regions," Regional Research of Russia, Springer, vol. 12(3), pages 378-385, September.
    4. Schulz, Jan & Mayerhoffer, Daniel M., 2021. "A network approach to consumption," BERG Working Paper Series 173, Bamberg University, Bamberg Economic Research Group.

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    More about this item

    Keywords

    Inequality; Aggregate consumption; Average propensity to consume;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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