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Consumption Inequality and Partial Insurance

Blundell, R; Pistaferri, L; Preston, I; (2008) Consumption Inequality and Partial Insurance. AMER ECONOMIC ASSOC

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Abstract

This paper examines the link between income and consumption inequality. We create panel data on consumption for the Panel study of Income dynamics using an imputation procedure based on food demand estimates from. the Consumer Expenditure Survey. We document a disjuncture between income and consumption inequality over the 1980s and show that it can be explained by changes in the persistence of income shocks. We find some partial insurance of permanent shocks, especially for the college educated and those near retirement. We find full insurance of transitory shocks except among poor households. Taxes, transfers, and family labor supply play all important role in insuring permanent shocks.

Type: Report
Title: Consumption Inequality and Partial Insurance
DOI: 10.1257/aer.98.5.1887
Keywords: LIFE-CYCLE EARNINGS, COVARIANCE STRUCTURE, TAX-REFORM, PANEL DATA, INCOME, HETEROGENEITY, DYNAMICS, WELFARE, UNCERTAINTY, VARIANCE
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/15896
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