IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/17982.html
   My bibliography  Save this paper

The Evolution of Income, Consumption, and Leisure Inequality in The US, 1980-2010

Author

Listed:
  • Orazio Attanasio
  • Erik Hurst
  • Luigi Pistaferri

Abstract

Recent research has documented that income inequality in the United States has increased dramatically over the prior three decades. There has been less of a consensus, however, on whether the increase in income inequality was matched by an equally large increase in consumption inequality. Most researchers have studied this question using data from the Consumer Expenditure Survey (CE) and some studies have suggested that the increase in consumption inequality has been modest. Unfortunately ,there is now mounting evidence that the CE is plagued by serious non-classical measurement error, which hinders the extent to which definitive conclusions can be made about the extent to which consumption inequality has evolved over the last three decades. In this paper, we use a variety of different techniques to overcome the measurement error problems with the CE. First, we use data from the diary component of the CE, focusing on categories where measurement error has been found to be less of an issue. Second, we explore inequality measures within the CE using the value of vehicles owned, a consumption component that is considered to be measured well. Third, we try to account directly for the non-classical measurement error of the CE by comparing the spending on luxuries (entertainment) relative to necessities (food). This is similar to the recent approach taken by Browning and Crossley (2009) and Aguiar and Bils (2011). Finally, we use expenditure data from the Panel Study of Income Dynamics to explore the dynamics of alternative measures of consumption inequality. All of our different methods yield similar results. We find that consumption inequality within the U.S. between 1980 and 2010 has increased by nearly the same amount as income inequality.

Suggested Citation

  • Orazio Attanasio & Erik Hurst & Luigi Pistaferri, 2012. "The Evolution of Income, Consumption, and Leisure Inequality in The US, 1980-2010," NBER Working Papers 17982, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17982
    Note: EFG
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w17982.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Richard Blundell & Luigi Pistaferri & Ian Preston, 2004. "Imputing consumption in the PSID using food demand estimates from the CEX," IFS Working Papers W04/27, Institute for Fiscal Studies.
    2. Mark Bils & Mark Aguiar, 2010. "Has Consumption Inequality Mirrored Income Inequality?," 2010 Meeting Papers 1334, Society for Economic Dynamics.
    3. Attanasio, Orazio & Davis, Steven J, 1996. "Relative Wage Movements and the Distribution of Consumption," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1227-1262, December.
    4. Cutler, David M & Katz, Lawrence F, 1992. "Rising Inequality? Changes in the Distribution of Income and Consumption in the 1980's," American Economic Review, American Economic Association, vol. 82(2), pages 546-551, May.
    5. Orazio P. Attanasio & Nicola Pavoni, 2011. "Risk Sharing in Private Information Models With Asset Accumulation: Explaining the Excess Smoothness of Consumption," Econometrica, Econometric Society, vol. 79(4), pages 1027-1068, July.
    6. Martin Browning & Thomas Crossley, 2009. "Are Two Cheap, Noisy Measures Better Than One Expensive, Accurate One?," American Economic Review, American Economic Association, vol. 99(2), pages 99-103, May.
    7. Bruce D. Meyer & James X. Sullivan, 2009. "Five Decades of Consumption and Income Poverty," NBER Working Papers 14827, National Bureau of Economic Research, Inc.
    8. Richard Blundell & Ian Preston, 1998. "Consumption Inequality and Income Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 603-640.
    9. Deaton, Angus & Paxson, Christina, 1994. "Intertemporal Choice and Inequality," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 437-467, June.
    10. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2010. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States: 1967-2006," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 15-51, January.
    11. Richard Blundell & Luigi Pistaferri & Ian Preston, 2008. "Consumption Inequality and Partial Insurance," American Economic Review, American Economic Association, vol. 98(5), pages 1887-1921, December.
    12. Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 163-193.
    13. Thesia I. Garner & Atsushi Maki, 2004. "The gap between macro and micro economic statistics: Estimation of the misreporting model using micro-data sets derived from the Consumer Expenditure Survey," Econometric Society 2004 Australasian Meetings 33, Econometric Society.
    14. Mark Aguiar & Erik Hurst, 2007. "Measuring Trends in Leisure: The Allocation of Time Over Five Decades," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 969-1006.
    15. Laura Blow & Valérie Lechene & Peter Levell, 2014. "Using the CE to Model Household Demand," NBER Chapters,in: Improving the Measurement of Consumer Expenditures, pages 141-178 National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Evolution of Income, Consumption, and Leisure Inequality in The US, 1980-2010
      by maximorossi in NEP-LTV blog on 2012-04-20 00:39:32
    2. The Evolution of Income, Consumption, and Leisure Inequality in The US, 1980-2010
      by maximorossi in NEP-LTV blog on 2012-04-20 00:39:32
    3. Reagan and the role of the past in shaping the future
      by Jonas Feit in Conscience Warrior on 2013-12-15 00:10:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Osberg, Lars, 2013. "Instability implications of increasing inequality: Evidence from North America," Economic Modelling, Elsevier, vol. 35(C), pages 918-930.
    2. repec:eee:inecon:v:108:y:2017:i:c:p:387-412 is not listed on IDEAS
    3. Olivier Coibion & Yuriy Gorodnichenko & Lorenz Kueng & John Silvia, 2012. "Innocent Bystanders? Monetary Policy and Inequality in the U.S," NBER Working Papers 18170, National Bureau of Economic Research, Inc.
    4. Clément Bellet, 2017. "Essays on Inequality, Social Preferences and Consumer Behavior," Sciences Po publications info:hdl:2441/vbu6kd1s68o, Sciences Po.
    5. Antràs, Pol & de Gortari, Alonso & Itskhoki, Oleg, 2017. "Globalization, inequality and welfare," Journal of International Economics, Elsevier, vol. 108(C), pages 387-412.
    6. Ravenna, Federico & Vincent, Nicolas, 2014. "Inequality and debt in a model with heterogeneous agents," Economics Letters, Elsevier, vol. 123(2), pages 177-182.
    7. Campos, Rodolfo G. & Reggio, Iliana, 2014. "Measurement error in imputation procedures," Economics Letters, Elsevier, vol. 122(2), pages 197-202.
    8. repec:eee:macchp:v2-255 is not listed on IDEAS
    9. Amy Beech & Rosetta Dollman & Richard Finlay & Gianni La Cava, 2014. "The Distribution of Household Spending in Australia," RBA Bulletin, Reserve Bank of Australia, pages 13-22, March.
    10. Haiyan Ding & Hui He, 2018. "A Tale of Transition: An Empirical Analysis of Economic Inequality in Urban China, 1986-2009," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 29, pages 106-137, July.
    11. Mian, A. & Sufi, A., 2016. "Who Bears the Cost of Recessions? The Role of House Prices and Household Debt," Handbook of Macroeconomics, Elsevier.
    12. repec:eee:chieco:v:46:y:2017:i:c:p:208-228 is not listed on IDEAS
    13. Moira Daly & Dmytro Hryshko & Iourii Manovskii, 2016. "Improving the Measurement of Earnings Dynamics," NBER Working Papers 22938, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17982. 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: (). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.