Trends in Inequality Using Consumption‐expenditures: The U.S. From 1960 to 1993

Johnson, David S.; Shipp, Stephanie

doi:10.1111/j.1475-4991.1997.tb00211.x

Cited by 63 publications

(48 citation statements)

References 15 publications

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“…Consistently, we show that annual earnings inequality increased substantially more than hourly wage inequality. We add to this evidence an additional fact on the dynamics of U.S. cross-sectional inequality that has been previously documented from the Consumer Expenditure Survey (CEX): consumption inequality rose slightly during the first half of the 1980's (Cutler andKatz, 1991, andJohnson andShipp, 1997) and has remained roughly stable thereafter Perri, 2002, 2003). 1 Figure 1 provides a graphical portrait of these facts.…”

Section: Introductionmentioning

confidence: 60%

The Macroeconomic Implications of Rising Wage Inequality in the United States

Heathcote

Storesletten

Violante

2010

Journal of Political Economy

315

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This paper explores the macroeconomic and welfare implications of the sharp rise in U.S. wage inequality . In the data, cross-sectional earnings variation increased substantially more than wage variation, due to a sharp rise in the wage-hours correlation. At the same time, inequality in hours worked and consumption remained roughly constant through time. Using data from the PSID, we decompose the rise in wage inequality into changes in the variance of permanent, persistent and transitory shocks. With the estimated changes in the wage process as the only primitive, we show that a standard calibrated OLG model with incomplete markets can successfully account for all these patterns in cross-sectional U.S. data. Through a set of counter-factual experiments, we assess the role of each component of the wage process for the evolution in the various dimensions of inequality. The model also allows us to investigate the welfare costs of the rise in inequality: we find that the unconditional expected welfare loss is equivalent to a 5 percent decline in lifetime income for the worst-affected cohorts, those entering the labor market in the mid 1980's. Ex post, these costs are widely dispersed across agents, due both to differences in permanent individual attributes and to differences in labor market histories. An extensive sensitivity analysis verifies the robustness of our results to alternative preferences and borrowing limits, and to the inclusion of female labor force participation. JEL Classification Codes: E21, D31.

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Section: Introductionmentioning

confidence: 60%

The Macroeconomic Implications of Rising Wage Inequality in the United States

Heathcote

Storesletten

Violante

2010

Journal of Political Economy

315

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“…6 The opposite result has been reported by Johnson and Shipp (1997) for the U.S. as noted earlier. The finding for Spain is counter to general economic intuition about the prevalence of transitory components in current income.…”

Section: Introductionmentioning

confidence: 39%

“…Second, the substitution of total expenditures for income usually results in lower estimated poverty rates (Garner et al 1996, Slesnick 1993. And third, the distribution of household expenditures is substantially more equal than the distribution of income in the U.S. (Johnson and Shipp 1997). 3 As far as recent trends for the U.S., while it is true that inequality 4 increased during the 1980s, no matter how it was measured, the increase in consumption-based inequality was smaller than the increase in income inequality however (Cutler and Katz 1992;Johnson and Shipp 1997).…”

Section: Introductionmentioning

confidence: 99%

“…In particular, from 1973-74 to 1990-91, household expenditure and income inequality fell in Spain (Del Río andRuiz-Castillo 2001a, 2001b;Ruiz-Castillo 1995). In contrast, during the 1980s in the U.S. household expenditure and income inequality increased (for example, see Johnson and Shipp 1997).…”

Section: Introductionmentioning

confidence: 99%

“…5 5 For the U.S., while it is true that inequality increased during the 1980s, no matter how it was measured, the increase in consumption-based inequality was smaller than the increase in income inequality (Cutler andKatz 1991, andShipp 1997). For Spain, the decrease in income inequality during the 1980s was greater than the decrease in expenditure inequality (Alvarez Aledo et al 1996).…”

Section: Introductionmentioning

confidence: 99%

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The Influence of Demographics and Household-Specific Price Indices on Consumption-Based Inequality and Welfare: A Comparison of Spain and the United States

Garner¹,

Ruiz‐Castillo²,

Sastre³

2003

Southern Economic Journal

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Previous research suggests that income inequality is lower in Spain than in the U.S. This paper studies whether this ranking remains the same when household consumption expenditures are used as a proxy for household welfare. Both inequality and social welfare, as components of economic well-being, are examined. Total household expenditures from each country 's 1990-91 consumer expenditure survey are used as the basis for the analysis. When consumption expenditures are substituted for income as the measure of economic well-being, the ranking of Spain and the U.S. varies as both household size and the equivalence scale adjustment change. When focusing on household size alone, inequality and welfare comparisons are drastically different for smaller and larger households. The income inequality ranking can only be maintained for expenditure distributions when economies of scale are assumed to be small or non-existent. However, welfare is always higher in the U.S. than in Spain. It is concluded that household demographic characteristics, as well as equivalence scale adjustments, can be very important in international comparisons. With regard to householdspecific relative price effects, inflation during the 1980s in both countries has been essentially neutral from a distributional point of view, so that all results are robust to the choice of time period.2

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The Influence of Demographics and Household‐Specific Price Indices on Consumption‐Based Inequality and Welfare: A Comparison of Spain and the United States

Garner

Ruiz‐Castillo

Sastre

2003

Southern Economic Journal

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Previous research has suggested that inequality is lower in Spain than in the United States when it is based on income. For the present article, both inequality and social welfare are examined, with household consumption expenditures used as a proxy for household welfare. For tractability, equivalence scales depended only on the number of people in the household. Household‐specific price indices were used to express the 1990‐1991 expenditure distributions in 1981 and 1991 winter prices. Our results reveal that inequality and welfare comparisons are drastically different for smaller and larger households. When all households are considered, the two‐country comparison suggests that the income inequality ranking can only be maintained for expenditure distributions when economies of scale are small or nonexistent. However, welfare is always higher in the United States than in Spain. Because inflation during the 1980s in both countries was essentially distributionally neutral, all results appear to be robust to the choice of time period.

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Trends in Inequality Using Consumption‐expenditures: The U.S. From 1960 to 1993

Cited by 63 publications

References 15 publications

The Macroeconomic Implications of Rising Wage Inequality in the United States

The Macroeconomic Implications of Rising Wage Inequality in the United States

The Influence of Demographics and Household-Specific Price Indices on Consumption-Based Inequality and Welfare: A Comparison of Spain and the United States

The Influence of Demographics and Household‐Specific Price Indices on Consumption‐Based Inequality and Welfare: A Comparison of Spain and the United States

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