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.
Much of Consumer Price Index (CPI) inflation for consumer durables reflects shifts to newer product models that display higher prices, not price increases for a given set of goods. I examine how ...these higher prices for new models should be divided between quality growth and price inflation based on (a) whether consumer purchases shift toward or away from the new models and (b) whether new-model price increases generate higher relative prices that persist through the model cycle. I conclude that two-thirds of the price increases with new models should be treated as quality growth. This implies that CPI inflation for durables has been overstated by almost 2 percentage points per year, with quality growth understated by the same magnitude.
Employment and hours are more cyclical than dictated by productivity and consumption. This intratemporal labor wedge can arise from product or labor market distortions. Based on employee wages, the ...literature has attributed the intratemporal wedge almost entirely to labor market distortions. Because wages may be smoothed versions of labor’s true cyclical price, we instead examine the self-employed and intermediate inputs, respectively. For recent decades in the United States, we find price markup movements are at least as cyclical as wage markup movements. Thus, countercyclical price markups deserve a central place in business-cycle research, alongside sticky wages and matching frictions.
We examine the frequency of price changes for 350 categories of goods and services covering about 70 percent of consumer spending, on the basis of unpublished data from the Bureau of Labor Statistics ...for 1995–97. In comparison with previous studies, we find much more frequent price changes, with half of prices lasting less than 4.3 months. Even excluding temporary price cuts (sales), we find that half of prices last 5.5 months or less. We also find that the frequency of price changes differs dramatically across goods. Compared to the predictions of popular sticky‐price models, actual inflation rates are far more volatile and transient for sticky‐price goods.
Does Schooling Cause Growth? Bils, Mark; Klenow, Peter J.
The American economic review,
12/2000, Letnik:
90, Številka:
5
Journal Article
Recenzirano
A number of economists find that growth and schooling are highly correlated across countries. A model is examined in which the ability to build on the human capital of one's elders plays an important ...role in linking growth to schooling. The model is calibrated to quantify the strength of the effect of schooling on growth by using evidence from the labor literature on Mincerian returns to education. The upshot is that the impact of schooling on growth explains less than one-third of the empirical cross-country relationship. The ability of reverse causality to explain this empirical relationship is also investigated.
Quantifying Quality Growth Bils, Mark; Klenow, Peter J.
The American economic review,
09/2001, Letnik:
91, Številka:
4
Journal Article
Recenzirano
Odprti dostop
Using U.S. Consumer Expenditure Surveys, we estimate "quality Engel curves" for 66 durable goods based on the extent richer households pay more for each good. The same data show that the average ...price paid rises faster from 1980 to 1996 for goods with steeper quality Engel curves, as if households are ascending these curves. BLS prices likewise increase more quickly for goods with steeper quality Engel curves, suggesting the BLS does not fully net out the impact of quality upgrading. We estimate that annual quality growth averages 3.7 percent for our goods, with 2.2 percent showing up as higher inflation.
Who Are the Hand-to-Mouth? Aguiar, Mark; Bils, Mark; Boar, Corina
The Review of economic studies,
05/2024
Journal Article
Recenzirano
Abstract Many households hold little wealth. In standard precautionary savings models, these households should not only display higher marginal propensities to consume (MPCs) but also higher future ...consumption growth. In contrast, we see from the Panel Study of Income Dynamics that such “hand-to-mouth” households do not display higher growth in spending. They also exhibit greater volatility of spending and adjust their spending to a greater extent through the number of categories consumed. Consistent with a role for preference heterogeneity, the panel data show that it is persistent differences across households, not current assets, that predict low consumption growth and other spending differences for the hand-to-mouth households. To identify the extent of preference heterogeneity, we consider the model of Kaplan and Violante with both liquid and illiquid assets, but allow heterogeneity in preferences. To match the data, many poor hand-to-mouth must be relatively impatient and have a high inter-temporal elasticity of substitution. The model shows that preferences predominantly explain the higher MPCs for low-asset households. Preference heterogeneity notably increases the spending impact of fiscal transfers, but only if targeted, while reducing that from interest rate cuts.
Misallocation or Mismeasurement? Bils, Mark; Klenow, Peter J.; Ruane, Cian
Journal of monetary economics,
November 2021, 2021-11-00, Letnik:
124
Journal Article
Recenzirano
Odprti dostop
•Gaps in revenues per input (TFPR) across plants may reflect misallocation.•Our methodology corrects misallocation estimates for measurement error.•Measurement error overstates misallocation by more ...in the U.S. than in India.•Measurement error accounts for most the increase in TFPR dispersion in the U.S.
The ratio of revenue to inputs differs greatly across plants within countries such as the U.S. and India. Such gaps may reflect misallocation which lowers aggregate productivity. But differences in measured average products need not reflect differences in true marginal products. We propose a way to estimate the gaps in true marginal products in the presence of measurement error. Our method exploits how revenue growth is less sensitive to input growth when a plant’s average products are overstated by measurement error. For Indian manufacturing from 1985 to 2013, our correction lowers potential gains from reallocation by 20%. For the U.S. the effect is even more dramatic, reducing potential gains by 60% and eliminating 2/3 of a severe downward trend in allocative efficiency over 1978 to 2013.
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