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Has Consumption Inequality Mirrored Wealth Inequality in the Survey of Consumer Finances?

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  • Brant Abbott
  • Robin Brace

Abstract

A method to impute consumption expenditure inequality between wealth groups in the Survey of Consumer Finances is provided, allowing for measurement error that is correlated with income and wealth. Identification is derived from observing food at home and away, which are relative necessities and luxuries, respectively. The gap in expenditure between top and bottom wealth quintiles increased by 50% between 2004 and 2013, indicating that increases in wealth inequality have passed through to consumption.

Suggested Citation

  • Brant Abbott & Robin Brace, 2020. "Has Consumption Inequality Mirrored Wealth Inequality in the Survey of Consumer Finances?," Working Paper 1427, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1427
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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/wpaper/qed_wp_1427.pdf
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    References listed on IDEAS

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    1. Mark Aguiar & Mark Bils, 2015. "Has Consumption Inequality Mirrored Income Inequality?," American Economic Review, American Economic Association, vol. 105(9), pages 2725-2756, September.
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    7. Bruce D. Meyer & James X. Sullivan, 2017. "Consumption and Income Inequality in the U.S. Since the 1960s," NBER Working Papers 23655, National Bureau of Economic Research, Inc.
    8. 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.
    9. Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(1), pages 163-193.
    10. Barry P. Bosworth & Rosanna Smart, 2009. "Evaluating Micro-Survey Estimates of Wealth and Saving," Working Papers, Center for Retirement Research at Boston College wp2009-4, Center for Retirement Research, revised Jan 2009.
    11. Pfeffer, Fabian T. & Schoeni, Robert F. & Kennickell, Arthur & Andreski, Patricia, 2016. "Measuring wealth and wealth inequality: Comparing two U.S. surveys," Journal of Economic and Social Measurement, IOS Press, issue 2, pages 103-120.
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    Cited by:

    1. Brant Abbott & Giovanni Gallipoli, 2022. "Permanent‐income inequality," Quantitative Economics, Econometric Society, vol. 13(3), pages 1023-1060, July.

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    More about this item

    Keywords

    Inequality; Wealth; Income; Consumption;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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