| dc.description.abstract | My research is centered around understanding consumption behavior and its relationship
with inequality.
In Chapter 1, I study how consumption inequality in the United States has evolved over
time, with a particular focus on distinguishing two major expenditure components: services
and goods. I argue that such distinction is important to understand inequality between
high and low income groups. I show that increases in consumption inequality over the
period 1984-2018 were driven mostly by rising inequality in expenditure on services rather
than goods. I further show that most of it was driven by increased inequality in young
households expenditure in services, whereas older households have experienced no change
in inequality of either good or service expenditures. As modern societies undergo the
transformation into service societies, this research contributes to our understanding of the
diverse effects of inequality and informs policy decisions to ensure that this transformation
benefits all.
Chapter 2 proposes a canonical model of intertemporal choice in which both current
and future conspicuous consumption can distort household consumption behavior. What
makes our model tractable is that we assume that each consumer cares about the expected
comparison of relative consumption, which provides a parsimonious characterization of
positional concerns. We show that equilibrium consumption behavior is a function of
the distribution of conspicuous consumption in an individual’s reference group as well as
her own permanent income. In turn, the distribution of conspicuous consumption is a
function of the distribution of permanent income. The relevant empirical implication is
that an individual’s consumption, by itself, is no longer a valid proxy for the individual’s
permanent income if relative consumption matters.
In Chapter 3, we document a robust effect of visible inequality on household expenditures in the United States over the period 2010–2018. To that end, we exploit variation in
the cross-sectional distribution of visible consumption — expenditures in clothing, personal
care, food away from home and vehicles — for younger and older households across regions
of the United States and over time. We find that rising inequality in expenditure on visible
goods within the different groups is associated with an increase in average spending on
those same goods as well as an increase in total expenditures by the average household in
the group. Our main findings are not likely to be a symptom of correlated differences in
preferences across generations, selection effects across geographical locations, alternative
sources of state-level variation over time, or measurement error. Rather, they most likely
reflect actual distortions associated with consumption externalities. We conjecture that
historically low interest rates and the rise of social media underlie our findings. | en |
