Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25457
Authors: 
Krueger, Dirk
Perri, Fabrizio
Year of Publication: 
2005
Series/Report no.: 
CFS Working Paper 2005/15
Abstract: 
Using data from the Consumer Expenditure Survey we first document that the recent increase in income inequality in the US has not been accompanied by a corresponding rise in consumption inequality. Much of this divergence is due to different trends in within-group inequality, which has increased significantly for income but little for consumption. We then develop a simple framework that allows us to analytically characterize how within-group income inequality affects consumption inequality in a world in which agents can trade a full set of contingent consumption claims, subject to endogenous constraints emanating from the limited enforcement of intertemporal contracts (as in Kehoe and Levine, 1993). Finally, we quantitatively evaluate, in the context of a calibrated general equilibrium production economy, whether this set-up, or alternatively a standard incomplete markets model (as in Ayiagari 1994), can account for the documented stylized consumption inequality facts from the US data.
Subjects: 
Limited Enforcement
Risk Sharing
Consumption Inequality
JEL: 
E21
D91
D63
D31
G22
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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