Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/69420
Authors: 
Alvarez-Cuadrado, Francisco
el Attar, Mayssun
Year of Publication: 
2012
Series/Report no.: 
Discussion Paper Series, Forschungsinstitut zur Zukunft der Arbeit 7083
Abstract: 
Over the last three decades, average income for the bottom half of the US distribution increased by 8% while their average saving rate decreased by eight percentage points. Over the same period the US experienced a substantial increase in inequality and a continuous decrease in the aggregate saving rate. We propose an explanation based on interpersonal comparisons consistent with these trends. When households care about their consumption relative to others, individual saving rates decrease with reference income while aggregate saving decreases with income inequality. We provide evidence from the PSID and a panel of OECD countries consistent with these predictions.
Subjects: 
relative consumption
income inequality
saving
JEL: 
D91
E21
C23
Document Type: 
Working Paper

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