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Home Research areas Consumer behaviour and indirect taxation Consumption dynamics and inequality

Consumption dynamics and inequality

Our research in this area looks both at how much households save, spend and borrow at different stages in the life cycle, and how these decisions feed into inequalities in consumption both cross-sectionally and dynamically. A greater understanding of how consumers allocate their spending over time can help answer questions about how consumption and saving will respond to changes in household circumstances, as well as the degree to which consumers bring forward or postpone purchases in response to changes in interest rates and taxes.

Selected highlights

Journal article | American Economic Review
consumption_inequality_and_partial_insurance
This paper describes the transmission of income inequality into consumption inequality and in so doing investigates the degree of insurance to income shocks.
Journal article | Econometrica
intertemporal_nonseparability_or_borrowing_restrictions_a_disaggregate_analysis_using_a_us_consumption_panel
The authors propose a method to test for liquidity constraints which relies on using the within period marginal rate of substitution condition as a benchmark to evaluate the intertemporal Euler equation.
Journal article | American Economic Review
consumption_over_the_life_cycle_and_over_the_business_cycle
We assess the empirical validity of the life-cycle model using a time series of cross sections and a novel parametrization of preferences.
Journal article | Quarterly Journal of Economics
This paper places the debate over using consumption or income in studies of inequality growth in a formal intertemporal setting. It highlights the importance of permanent and transitory income uncertainty in the evaluation of growth in consumption inequality.
Journal article | Econometrica
earnings_and_consumption_dynamics_a_nonlinear_panel_data_framework
We develop a new quantile-based panel data framework to study the nature of income persistence and the transmission of income shocks to consumption.
Journal article | Journal of Political Economy
is_consumption_growth_consistent_with_intertemporal_optimization_evidence_from_the_consumer_expenditure_survey
In this paper the authors show that some of the predictions of models of consumer intertemporal optimization are in line with the patterns of nondurable expenditure observed in U.S. household-level data.

Contacts

Contact IFS on 020 7291 4800 or mailbox@ifs.org.uk

Peter Levell
Senior Research Economist
Martin O'Connell
Deputy Research Director