What Really Happened to Consumption Inequality in the US?

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This paper considers data quality issues for the analysis of consumption inequality exploiting two complementary datasets from the Consumer Expenditure Survey for the United States. The Interview sample follows survey households over four calendar quarters and consists of retrospectively collected information about monthly expenditures on durable and non-durable goods. The Diary sample interviews household for two consecutive weeks and includes detailed information about frequently purchased items (food, personal cares and household supplies). Most reliable information from each sample is exploited to derive a correction for the measurement error affecting observed measures of consumption inequality in the two surveys. We find that consumption inequality, as measured by the standard deviation of log non-durable consumption, has increased by roughly 5% points during the 1990s.

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