TY - JOUR
T1 - Consumption inequality across heterogeneous families
AU - Theloudis, Alexandros
PY - 2021/7
Y1 - 2021/7
N2 - What does preference heterogeneity imply for consumption inequality? This paper studies the link from wage to consumption inequality within a lifecycle model of consumption and family labor supply. Its distinctive feature is that households have general heterogeneous preferences over consumption and labor supply. The paper shows identification of the joint distribution of unobserved household preferences separately from the observed distributions of incomes and outcomes. Estimation on data from the Panel Study of In- come Dynamics in the US reveals substantial unexplained heterogeneity in consumption preferences but little unexplained heterogeneity in labor supply preferences. Preference heterogeneity accounts for about a third of consumption inequality in recent years and implies, on average, lower partial insurance of wage shocks compared to recent studies in the literature.
AB - What does preference heterogeneity imply for consumption inequality? This paper studies the link from wage to consumption inequality within a lifecycle model of consumption and family labor supply. Its distinctive feature is that households have general heterogeneous preferences over consumption and labor supply. The paper shows identification of the joint distribution of unobserved household preferences separately from the observed distributions of incomes and outcomes. Estimation on data from the Panel Study of In- come Dynamics in the US reveals substantial unexplained heterogeneity in consumption preferences but little unexplained heterogeneity in labor supply preferences. Preference heterogeneity accounts for about a third of consumption inequality in recent years and implies, on average, lower partial insurance of wage shocks compared to recent studies in the literature.
KW - Unobserved preference heterogeneity
KW - Family labor supply
KW - Lifecycle model
KW - Partial insurance
KW - PSID
UR - https://www.mendeley.com/catalogue/c37912d7-c714-3f62-9210-2246875db51b/
UR - http://www.scopus.com/inward/record.url?scp=85106571987&partnerID=8YFLogxK
U2 - 10.1016/j.euroecorev.2021.103765
DO - 10.1016/j.euroecorev.2021.103765
M3 - Article
SN - 0014-2921
VL - 136
JO - European Economic Review
JF - European Economic Review
M1 - 103765
ER -