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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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    Cited by:

    1. Kohlscheen, Emanuel & Lombardi, Marco & Zakrajšek, Egon, 2021. "Income Inequality and the depth of economic downturns," Economics Letters, Elsevier, vol. 205(C).
    2. Schulz, Jan & Mayerhoffer, Daniel M., 2021. "A network approach to consumption," BERG Working Paper Series 173, Bamberg University, Bamberg Economic Research Group.
    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.

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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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