IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpla/0504001.html
   My bibliography  Save this paper

Consumption Inequality and Intra-Household Allocations

Author

Listed:
  • Jeremy Lise

    (Queen's University)

  • Shannon Seitz

    (Queen's University)

Abstract

The consumption literature uses adult equivalence scales to measure individual level inequality. This practice imposes the assumption that there is no within household inequality. In this paper, we show that ignoring consumption inequality within households produces misleading estimates of inequality along two dimensions. First, the use of adult equivalence scales underestimates the level of cross sectional consumption inequality by 30%. This result is driven by the fact that large differences in the earnings of husbands and wives translate into large differences in consumption allocations within households. Second, the rise in inequality since the 1970s is overstated by two-thirds: within house-hold inequality declined over time as the share of income provided by wives increased. Our findings also indicate that increases in marital sorting on wages and hours worked can simultaneously explain virtually all of the decline in within household inequality and a substantial fraction of the rise in between household inequality for one and two adult households in the UK since the 1970s.

Suggested Citation

  • Jeremy Lise & Shannon Seitz, 2005. "Consumption Inequality and Intra-Household Allocations," Labor and Demography 0504001, EconWPA.
  • Handle: RePEc:wpa:wuwpla:0504001
    Note: Type of Document - pdf; pages: 40
    as

    Download full text from publisher

    File URL: http://econwpa.repec.org/eps/lab/papers/0504/0504001.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Martin Browning & Pierre-André Chiappori & Arthur Lewbel, 2013. "Estimating Consumption Economies of Scale, Adult Equivalence Scales, and Household Bargaining Power," Review of Economic Studies, Oxford University Press, vol. 80(4), pages 1267-1303.
    2. M. Browning & P. A. Chiappori, 1998. "Efficient Intra-Household Allocations: A General Characterization and Empirical Tests," Econometrica, Econometric Society, vol. 66(6), pages 1241-1278, November.
    3. Dirk Kreuger & Fabrizio Perri, 2002. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory," Working Papers 02-15, New York University, Leonard N. Stern School of Business, Department of Economics.
    4. Vermeulen, Frederic, 2002. " Collective Household Models: Principles and Main Results," Journal of Economic Surveys, Wiley Blackwell, vol. 16(4), pages 533-564, September.
    5. Browning, Martin & Francois Bourguignon & Pierre-Andre Chiappori & Valerie Lechene, 1994. "Income and Outcomes: A Structural Model of Intrahousehold Allocation," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1067-1096, December.
    6. Raquel Fernández & Richard Rogerson, 2001. "Sorting and Long-Run Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1305-1341.
    7. Richard Blundell & Pierre-Andre Chiappori & Thierry Magnac & Costas Meghir, 2007. "Collective Labour Supply: Heterogeneity and Non-Participation," Review of Economic Studies, Oxford University Press, vol. 74(2), pages 417-445.
    8. Manser, Marilyn & Brown, Murray, 1980. "Marriage and Household Decision-Making: A Bargaining Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 31-44, February.
    9. Haddad, Lawrence & Kanbur, Ravi, 1990. "How Serious Is the Neglect of Intra-Household Inequality?," Economic Journal, Royal Economic Society, vol. 100(402), pages 866-881, September.
    10. Olivier Donni, 2007. "Collective female labour supply: theory and application," Economic Journal, Royal Economic Society, vol. 117(516), pages 94-119, January.
    11. Kanbur, Ravi & Haddad, Lawrence, 1994. "Are Better Off Households More Unequal or Less Unequal?," Oxford Economic Papers, Oxford University Press, vol. 46(3), pages 445-458, July.
    12. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics,in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
    13. Richard Blundell & Ian Preston, 1998. "Consumption Inequality and Income Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 603-640.
    14. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-1385, November.
    15. Jay H. Hong & José-Víctor Ríos-Rull, 2012. "Life Insurance and Household Consumption," American Economic Review, American Economic Association, vol. 102(7), pages 3701-3730, December.
    16. Pendakur, Krishna, 1998. "Changes in Canadian Family Income and Family Consumption Inequality between 1978 and 1992," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(2), pages 259-283, June.
    17. Shannon Seitz, 2009. "Accounting for Racial Differences in Marriage and Employment," Journal of Labor Economics, University of Chicago Press, vol. 27(3), pages 385-437, July.
    18. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, April.
    19. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, April.
    20. Orazio Attanasio & Erich Battistin & Hidehiko Ichimura, 2004. "What Really Happened to Consumption Inequality in the US?," NBER Working Papers 10338, National Bureau of Economic Research, Inc.
    21. Richard Blundell & Pierre-André Chiappori & Costas Meghir, 2005. "Collective Labor Supply with Children," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1277-1306, December.
    22. Thomas F. Crossley & Krishna Pendakur, 2002. "Consumption Inequality," Department of Economics Working Papers 2002-09, McMaster University.
    23. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
    24. Barrett, Garry F & Crossley, Thomas F & Worswick, Christopher, 2000. "Consumption and Income Inequality in Australia," The Economic Record, The Economic Society of Australia, vol. 76(233), pages 116-138, June.
    25. Pierre-Andre Chiappori & Bernard Fortin & Guy Lacroix, 2002. "Marriage Market, Divorce Legislation, and Household Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 37-72, February.
    26. Erich Battistin, 2002. "Errors in Survey Reports of Consumption Expenditures," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C4-2, International Conferences on Panel Data.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Collective Model; Consumption Inequality; Marital Sorting; Adult Equivalence Scales;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

    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:wpa:wuwpla:0504001. 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: (EconWPA). General contact details of provider: http://econwpa.repec.org .

    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.