Money matters: Consumption volatility across the income distribution

Using data from the Consumer Expenditures Survey, we document the level and volatility of quarterly consumption across the socio-economic distribution. While the measurement of economic well-being in the United States is focused on income, the secular and policy discourse prioritizes income-adequacy to meet family needs. This concern over income adequacy centers on the capacity of individuals and families to predictably consume minimally acceptable levels of basic needs, and the social and economic mobility consequences of low levels of consumption. Our results show a clear socioeconomic and demographic gradient of lower consumption levels amid higher consumption volatility for economically disadvantaged groups. Of particular concern is the stylized fact that, among the categories we track, food and clothing exhibit relatively high levels of consumption volatility among low-income households.



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Jonathan Fisher Bradley Hardy