The Asymmetric Impact of Income Inequality on the Relative Consumption of Market and Non-Market Goods

Abstract

Increasing income inequality has an asymmetric impact on society. Affluent households consume both more market and non-market goods. Middle-class households however, in order to minimize utility loss, must substitute away non-market goods in an effort to maintain proportional consumption of market goods. Utilizing standard Cobb-Douglas utility functions this paper models the resulting asymmetric impact on affluent and non-affluent households. Census data is then used to test these conceptual results within the context of urban sprawl.