Saturday, November 9, 2013
West End Ballroom A (Washington Marriott)
*Names in bold indicate Presenter
Consumption inequality and income inequality tracked each other from 1985-2006. After that, consumption inequality dropped for the first few years and then rose the last year, while income inequality continued to rise. This paper explores why there was this divergence during the Great Recession? We find that the consumption of those at the top of the income distribution has fallen by more than the consumption of those at the bottom of the income distribution, generating the decrease in consumption inequality. Income inequality increased because the income at those of the top of the income distribution has fallen by less than the income of those at the bottom of the income distribution. We will then explore what mechanisms led consumption at the bottom of the distribution to remain relatively flat, such as cash and in-kind transfer programs. We will also explore what mechanisms led consumption at the top of the distribution to fall, focusing on the decreases in housing and non-housing wealth.