Consumption inequality in the Great Recession

Abstract

While the majority of inequality research focuses on income metrics to measure changes in inequality, a growing number of scholars argue that consumption is a better metric for measuring disparities in an individual's contemporaneous well-being. This study adds to a growing literature on consumption inequality by testing how consumption inequality varies across consumption categories and changes overtime. We find that overall consumption inequality declined since the mid-2000s before a recent uptick, which can be mostly explained by decreasing gaps in transportation expenditures on vehicle purchases. At the same time, the recent decline in overall consumption inequality disguises growing inequalities in health and education expenditures (human capital investments). The rising inequality in human capital investments is of particular concern as it can predict future increases in inequality.