PRICE SEARCH, CONSUMPTION INEQUALITY AND EXPENDITURE INEQUALITY OVER THE LIFE -CYCLE

• 成果类型: Article
• 署名作者: Arslan, Yavuz; Guler, Bulent; Taskin, Temel
• 署名单位: Bank for International Settlements (BIS); Indiana University System; Indiana University Bloomington; The World Bank
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.1111/iere.12488
• 发表日期: 2021
• 页码: 295-320
• 关键词: income shocks; dispersion; insurance; LABOR

摘要

We differentiate consumption from expenditure by incorporating price search decision into an otherwise standard life-cycle model. We first analytically show that, under very general conditions, poorer households search more and pay lower prices compared to wealthier ones. As a result, consumption inequality is smaller than expenditure inequality, and the gap between them increases over the life-cycle. Next, using a plausibly calibrated model, we find that life-cycle increase in consumption inequality is about 30% lower than the increase in expenditure inequality. Price search provides an insurance mechanism against income shocks and increases the welfare of a newborn by 3.9%.