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Consumption inequality and income uncertainty

Blundell, R; Preston, I; (1998) Consumption inequality and income uncertainty. Q J ECON , 113 (2) 603 - 640. Green open access

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Abstract

This paper places the debate over using consumption or income in studies of inequality growth in a formal intertemporal setting. It highlights the importance of permanent and transitory income uncertainty in the evaluation of growth in consumption inequality. We derive conditions under which the growth of variances and covariances of income and consumption can be used to separately identify the growth in the variance of permanent and transitory income shocks. Household data from Britain for the period 1968-1992 are used to show a strong growth in transitory inequality toward the end of this period, while younger cohorts are shown to face significantly higher levels of permanent inequality.

Type: Article
Title: Consumption inequality and income uncertainty
Open access status: An open access version is available from UCL Discovery
Keywords: LIFE-CYCLE, INTERTEMPORAL SUBSTITUTION, PRECAUTIONARY SAVINGS, WELFARE ANALYSIS
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/15770
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