Consumption, Poverty, and Welfare

The consumption of goods and services is a fundamental determinant of human welfare. The distribution of consumption among individuals has a bearing on many important issues – including inequality and poverty – in society’s economic, political and social domains. In most countries, aggregate consumption is the largest component of aggregate demand and, as such, accounts for much of the time variation in economic activity. For a given level of income, consumption determines savings and thus investment through the supply of capital. It is thus quite natural that consumption has been at the center of economic research throughout the last century.