Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314561 
Year of Publication: 
2025
Series/Report no.: 
IZA Discussion Papers No. 17664
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We study consumption and welfare inequality by analyzing how households allocate resources—market expenditures and the value of time—to the production of activities. The share of resources allocated to an activity rises or falls with wages, classifying them into luxuries or necessities, respectively. An estimated model with non-homothetic preferences shows that the rise in consumption inequality between 2004 and 2019 was mostly due to an increase in wage dispersion, while rising prices, especially of leisure luxuries, had a significant negative effect on inequality. The distinction between luxuries and necessities amplifies the counteracting effects of wage and price on inequality.
Subjects: 
time allocation
consumption expenditures
luxuries
necessities
activity production
inequality
JEL: 
J22
E21
D11
Document Type: 
Working Paper

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