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Contrary to the implications of economic theory, consumption inequality in the US did not react to the increases in income inequality during the last three decades. This paper investigates if a change in the type of income inequality - from permanent to transitory - or a change in the ability to...
Persistent link: https://www.econbiz.de/10010519133
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In his widely discussed book "Fault Lines" (2010), Raghuram Rajan argues that many U.S. consumers have reacted to the decline in their relative permanent incomes since the early 1980s by reducing saving and increasing debt. This has temporarily kept private consumption and thus aggregate demand...
Persistent link: https://www.econbiz.de/10009616515
Policy analysis frequently requires estimates of aggregate (or mean) consumer elasticities. However, estimates are often made incorrectly, based on elasticity calculations at mean income. We provide in this paper an overall integrated analytical framework that encompasses these biases and...
Persistent link: https://www.econbiz.de/10010498377
We demonstrate that upward-looking comparisons induce "keeping up with the richer Joneses"-behavior. Using data from the German Socio-Economic Panel, we estimate the effect of reference consumption, defined as the consumption level of all households who are perceived to be richer, on household...
Persistent link: https://www.econbiz.de/10010491182
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We demonstrate that interpersonal comparisons lead to "keeping up with the Joneses"-behavior. Using annual household data from the German Socio-Economic Panel, we estimate the causal effect of changes in reference consumption, defined as the consumption level of all households who are perceived...
Persistent link: https://www.econbiz.de/10010190171
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During the period leading up to the recession of 2007-08, there was a large increase in household debt relative to income, a large increase in measured consumption as a fraction of GDP, and a shift toward more unequal income distribution. It is sometimes claimed that these three developments...
Persistent link: https://www.econbiz.de/10011810449