We revisit to what extent the increase in income inequality since 1980 was mirrored by consumption inequality. We do so by constructing an alternative measure of consumption expenditure using a ...demand system to correct for systematic measurement error in the Consumer Expenditure Survey. Our estimation exploits the relative expenditure of high- and low-income households on luxuries versus necessities. This double differencing corrects for measurement error that can vary over time by good and income. We find consumption inequality tracked income inequality much more closely than estimated by direct responses on expenditures.
We measure the change in household spending caused by receipt of the economic stimulus payments of 2008, using questions added to the Consumer Expenditure Survey and variation from the randomized ...timing of disbursement. Households spent 12–30 percent (depending on specification) of their payments on nondurable goods during the three-month period of payment receipt, and a significant amount more on durable goods, primarily vehicles, bringing the total response to 50–90 percent of the payments. The responses are substantial and significant for older, lower-income, and home-owning households. Spending does not vary significantly with the method of disbursement (check versus electronic transfer). (JEL D12, D14, E21, E62)
This paper shows that, consistent with a signaling-by-consuming model à la Veblen, income elasticities can be predicted from the visibility of consumer expenditures. We outline a stylized conspicuous ...consumption model where income elasticity is endogenously predicted to be higher if a good is visible and lower if it is not. We then develop a survey-based measure of expenditure visibility, ranking different expenditures by how noticeable they are to others. Finally, we show that our visibility measure predicts up to one-third of the observed variation in elasticities across consumption categories in U.S. data.
A large literature shows that the self-employed underreport their income to tax authorities. In this paper, we quantify the extent to which the self-employed also systematically underreport their ...income in U.S. household surveys. We use the Engel curve describing the relationship between income and expenditures of wage and salary workers to infer the actual income, and thus the reporting gap, of the self-employed based on their reported expenditures. On average, the self-employed underreport their income by about 25%. We show that failing to account for such income underreporting leads to biased conclusions in a variety of settings.
Conspicuous Consumption and Race Charles, Kerwin Kofi; Hurst, Erik; Roussanov, Nikolai
The Quarterly journal of economics,
05/2009, Letnik:
124, Številka:
2
Journal Article
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Using nationally representative data on consumption, we show that Blacks and Hispanics devote larger shares of their expenditure bundles to visible goods (clothing, jewelry, and cars) than do ...comparable Whites. These differences exist among virtually all subpopulations, are relatively constant over time, and are economically large. Although racial differences in utility preference parameters might account for a portion of these consumption differences, we emphasize instead a model of status seeking in which conspicuous consumption is used as a costly indicator of a household's economic position. Using merged data on race- and state-level income, we demonstrate that a key prediction of the status-signaling model—that visible consumption should be declining in reference group income—is strongly borne out in the data for each racial group. Moreover, we show that accounting for differences in reference group income characteristics explains most of the racial difference in visible consumption.
Individual Preferences for Giving Fisman, Raymond; Kariv, Shachar; Markovits, Daniel
The American economic review,
12/2007, Letnik:
97, Številka:
5
Journal Article
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We utilize graphical representations of Dictator Games which generate rich individual-level data. Our baseline experiment employs budget sets over feasible payoff-pairs. We test these data for ...consistency with utility maximization, and we recover the underlying preferences for giving (trade-offs between own payoffs and the payoffs of others). Two further experiments augment the analysis. An extensive elaboration employs three-person budget sets to distinguish preferences for giving from social preferences (trade-offs between the payoffs of others). And an intensive elaboration employs step-shaped sets to distinguish between behaviors that are compatible with well-behaved preferences and those compatible only with not well-behaved cases.
We estimate and test the restrictions of a collective model of household consumption, usingz-conditional demands, in the context of a large conditional cash transfer program in rural Mexico. The ...model can explain the impacts of the program on the structure of food consumption. We use two plausible and novel distribution factors: the random allocation of a cash transfer to women and the relative size and wealth of the husband’s and wife’s family networks. Our structure does better at predicting the effect of exogenous increases in household income than an alternative, unitary, structure. We cannot reject efficiency of household decisions.
This paper studies a shape-invariant Engel curve system with endogenous total expenditure, in which the shape-invariant specification involves a common shift parameter for each demographic group in a ...pooled system of nonparametric Engel curves. We focus on the identification and estimation of both the nonparametric shapes of the Engel curves and the parametric specification of the demographic scaling parameters. The identification condition relates to the bounded completeness and the estimation procedure applies the sieve minimum distance estimation of conditional moment restrictions, allowing for endogeneity. We establish a new root mean squared convergence rate for the nonparametric instrumental variable regression when the endogenous regressor could have unbounded support. Root-n asymptotic normality and semiparametric efficiency of the parametric components are also given under a set of "low-level" sufficient conditions. Our empirical application using the U.K. Family Expenditure Survey shows the importance of adjusting for endogeneity in terms of both the nonparametric curvatures and the demographic parameters of systems of Engel curves.
A long-standing issue in political economics is to what extent party control makes a difference in determining fiscal and economics policies. This question is very difficult to answer empirically ...because parties are not randomly selected to govern political entities. This article uses a regression-discontinuity design, namely, party control changes discontinuously at 50% of the vote share, which can produce "near" experimental causal estimates of the effect of party control on economic outcomes. The method is applied to a large panel data set from Swedish local governments with a number of attractive features. The results show that there is an economically significant party effect: Left-wing governments spend and tax 2–3% more than right-wing governments. Left-wing governments also have 7% lower unemployment rates, which is partly due to that left-wing governments employ 4% more workers than right-wing governments.
This article seeks to determine whether children aged 16 and over and who are living with their parents influence the household decision-making process. Assuming collective rationality within the ...household, we show how a minimal number of decision-makers can be inferred from the parametric constraints of the collective model. Using UK Family Expenditure Surveys, we find the data to be consistent with the children being decision-makers. When stratifying the sample by age and by gender, our results indicate that both children aged between 16 and 21 and daughters, irrespective of their age, are decision-makers. Results for sons and children age 22 and over are less conclusive. Finally, the collective model is never rejected.
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