Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296294 
Year of Publication: 
2022
Citation: 
[Journal:] Quantitative Economics [ISSN:] 1759-7331 [Volume:] 13 [Issue:] 3 [Year:] 2022 [Pages:] 1023-1060
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
Through certainty equivalent consumption (CE) measures, we show that dispersion of current earnings, expenditures, and net worth overstate welfare inequality. This is largely due to the unaccounted value of future earnings, which we call human wealth. The latter mitigates permanent-income inequality, though its influence is diminished by the growing importance of assets in lifetime wealth. Average expenditures and CE inequality roughly doubled between 1983 and 2016 and, to weigh these offsetting forces, we decompose aggregate welfare changes into contributions from the level and dispersion of consumption, as well as uncertainty and demographic composition. Rising inequality has offset about 1/4 of the welfare gains from higher consumption, with most of the losses accruing after 2000.
Subjects: 
Wealth
human capital
permanent income
consumption
inequality
JEL: 
D31
E2
E21
I24
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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