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Does income inequality affect aggregate consumption? Revisiting the evidence

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  • Crespo Cuaresma, Jesus

    ()

  • Kubala, Jozef

    ()

  • Petrikova, Kristina

    ()

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 substantive empirical evidence of an effect of income inequality on aggregate consumption. (authors' abstract)

Suggested Citation

  • Crespo Cuaresma, Jesus & Kubala, Jozef & Petrikova, Kristina, 2016. "Does income inequality affect aggregate consumption? Revisiting the evidence," Department of Economics Working Paper Series 210, WU Vienna University of Economics and Business.
  • Handle: RePEc:wiw:wus005:4787
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    References listed on IDEAS

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    1. Francisco Alvarez-Cuadrado & Ngo Van Long, 2012. "Envy and Inequality," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 949-973, September.
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    13. Della Valle, Philip A & Oguchi, Noriyoshi, 1976. "Distribution, the Aggregate Consumption Function, and the Level of Economic Development: Some Cross-Country Results," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1325-1334, December.
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    More about this item

    Keywords

    Inequality; aggregate consumption; average propensity to consume;

    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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