How does household production affect measured income inequality?
Although income inequality has been studied extensively, relatively little attention has been paid to the role of household production. Economic theory predicts that households with less money income will produce more goods at home. Thus extended income, which includes the value of household production, should be more equally distributed than money income. Previous studies have found this to be the case and have speculated that the more-equal distribution of extended income is due to the weak correlation between money income and household production income. We also find that extended income is more equally distributed than money income. The main contribution of our paper is that we identify the reason for this result. Our sensitivity analysis indicates that virtually all of the decline in measured inequality when moving from money income to extended income is due to the addition of a large constant – the average value of household production – to money income and that measured inequality is insensitive to the correlation between money and household production income. The practical importance of this result is that estimates of extended income inequality are robust to imputation procedures and that researchers can obtain accurate estimates of trends by simply using mean values of household production income.
(This abstract was borrowed from another version of this item.)
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.
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.
Volume (Year): 24 (2011)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.springer.com|
More information through EDIRC
|Order Information:||Web: http://www.springer.com/economics/population/journal/148/PS2|
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.:
- Dirk Kreuger & Fabrizio Perri, 2002.
"Does Income Inequality Lead to Consumption Inequality? Evidence and Theory,"
02-15, New York University, Leonard N. Stern School of Business, Department of Economics.
- Dirk Krueger & Fabrizio Perri, 2005. "Does income inequality lead to consumption equality? evidence and theory," Staff Report 363, Federal Reserve Bank of Minneapolis.
- Dirk Krueger & Fabrizio Perri, 2002. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory," NBER Working Papers 9202, National Bureau of Economic Research, Inc.
- 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).
- Gallant, A. Ronald, 1981. "On the bias in flexible functional forms and an essentially unbiased form : The fourier flexible form," Journal of Econometrics, Elsevier, vol. 15(2), pages 211-245, February.
- Johnson, David & Shipp, Stephanie, 1997. "Trends in Inequality Using Consumption-Expenditures: The U.S. from 1960 to 1993," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(2), pages 133-152, June.
- Gronau, Reuben, 1987. "Home production -- A survey," Handbook of Labor Economics,in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 4, pages 273-304 Elsevier.
- Reuben Gronau & R. Layard, "undated". "Home Production - A Survey," University of Chicago - Population Research Center 85-2, Chicago - Population Research Center.
- Peter Gottschalk & Susan E. Mayer, 1997. "Changes in Home Production and Trends in Economic Inequality," Boston College Working Papers in Economics 382, Boston College Department of Economics.
- Andrews, Donald W. K., 1991. "Asymptotic optimality of generalized CL, cross-validation, and generalized cross-validation in regression with heteroskedastic errors," Journal of Econometrics, Elsevier, vol. 47(2-3), pages 359-377, February.
- Krueger, Dirk & Perri, Fabrizio, 2002. "Does Income Inequality Lead to Consumption Inequality?," CEPR Discussion Papers 3583, C.E.P.R. Discussion Papers.
- Bonke, Jens, 1992. "Distribution of Economic Resources: Implications of Including Household Production," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 38(3), pages 281-293, September.
- Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
- Brooks Pierce, 2001. "Compensation Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1493-1525.
- Jenkins, Stephen P & O'Leary, Nigel C, 1996. "Household Income Plus Household Production: The Distribution of Extended Income in the U.K," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 42(4), pages 401-419, December.
- Jens Bonke & Mette Deding & Mette Lausten, 2009. "Time and Money," Journal of Happiness Studies, Springer, vol. 10(2), pages 113-131, April.
- Gronau, Reuben, 1980. "Home Production-A Forgotten Industry," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 408-416, August. Full references (including those not matched with items on IDEAS)