The Evolution of Income, Consumption, and Leisure Inequality in the US, 1980-2010

Orazio Attanasio, Erik Hurst, Luigi Pistaferri

This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.

Chapter in forthcoming NBER book Improving the Measurement of Consumer Expenditures, Christopher Carroll, Thomas Crossley, and John Sabelhaus, editors
Conference held December 2-3, 2011
Forthcoming from University of Chicago Press
in NBER Book Series Studies in Income and Wealth

Recent research has documented that income inequality in the United States has increased dramatically over the prior three decades. Some argue this increase was matched by an equally large increase in consumption inequality. Studies of this question have used data from the Consumer Expenditure (CE) Survey, and some have suggested that the increase in consumption inequality has been modest. There is mounting evidence that the CE is plagued by serious non-classical measurement error, which hinders definitive conclusions about changes in consumption inequality. We use different techniques to overcome these measurement error problems. First, we use data from the diary component of the CE, focusing on categories where measurement error has been less problematic. Second, we explore inequality measures within the CE using the value of vehicles owned, a component that is measured well. Third, we try to account directly for the non-classical measurement error by comparing the spending on luxuries (entertainment) relative to necessities (food). Finally, we use expenditure data from the Panel Study of Income Dynamics to explore the dynamics of alternative measures of consumption inequality. We find that consumption inequality within the U.S. between 1980 and 2010 has increased by nearly the same amount as income inequality.

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This paper was revised on February 24, 2014

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This chapter first appeared as NBER working paper w17982, The Evolution of Income, Consumption, and Leisure Inequality in The US, 1980-2010, Orazio Attanasio, Erik Hurst, Luigi Pistaferri
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