Discussion Paper Details

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Title: Consumption and Income Inequality across Generations

Author(s): Giovanni Gallipoli, Hamish Low and Aruni Mitra

Publication Date: August 2020

Keyword(s): Consumption, Income, inequality and Intergenerational Persistence

Programme Area(s): Labour Economics, Macroeconomics and Growth and Public Economics

Abstract: We characterize the joint evolution of cross-sectional inequality in earnings, other sources of income and consumption across generations in the U.S. To account for cross-sectional dispersion, we estimate a model of intergenerational persistence and separately identify the influences of parental factors and of idiosyncratic life-cycle components. We find evidence of family persistence in earnings, consumption and saving behaviours, and marital sorting patterns. However, the quantitative contribution of idiosyncratic heterogeneity to cross-sectional inequality is significantly larger than parental effects. Our estimates imply that intergenerational persistence is not high enough to induce further large increases in inequality over time and across generations.

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Bibliographic Reference

Gallipoli, G, Low, H and Mitra, A. 2020. 'Consumption and Income Inequality across Generations'. London, Centre for Economic Policy Research.