Abstract
ABSTRACT We examine how consumption inequality tracks income inequality in a Korean household panel. To adjust for measurement errors in consumption, we employ the double-differencing correction of Aguiar and Bils (2015) (AB hereafter). In the first stage of the double-differencing, AB used current income as an instrument for unobserved true total expenditure, and we use permanent income as the instrument instead. For the U.S. Consumer Expenditure Survey data, AB found that after correcting for measurement errors, consumption inequality tracks income inequality more closely. We find that the same conclusion holds for the Korean panel data and the estimate of consumption inequality is robust to the choice of instrument for the total expenditure in the first stage regression.
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.
