Impact of Income Inequality on Consumption Expenditures Inequality: A Case Study of Iranian Households, 1966-2008

Abstract

This paper examines the relationship between income inequality and consumption inequality. For this purpose, we use data of urban and rural household's expenditures and incomes from 1966 to 2007 extracted from Iranian household’s budget surveys. We examine how the consumption inequality is related to the corresponding income inequality. Results indicate that income inequality has significant impact on consumption expenditures inequality. And all of the income fluctuations do not transmit in the consumption expenditures composition. So, the magnitude of consumption inequality is less than the magnitude of income inequality.