Abstract
What does preference heterogeneity imply for consumption inequality? This paper studies the link from wage to consumption inequality within a lifecycle model of consumption and family labor supply. Its distinctive feature is that households have general heterogeneous preferences over consumption and labor supply. The paper shows identification of the joint distribution of unobserved household preferences separately from the observed distributions of incomes and outcomes. Estimation on data from the Panel Study of Income Dynamics in the US reveals substantial unexplained heterogeneity in consumption preferences but little unexplained heterogeneity in labor supply preferences. Preference heterogeneity accounts for about a third of consumption inequality in recent years and implies, on average, lower partial insurance of wage shocks compared to recent studies in the literature.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
