Posted: November 11th, 2022

Consumption Inequality and Income Inequality

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1.Choose at least one point that you agree on, (or a point you think is especially important, or a point that helps contextualize prior knowledge or experiences you’ve had.). Explain why you think this point is good.
2.Choose one point that you disagree on, or something not covered in the paper that you think the author should have addressed. Explain why.

Consumption Inequality and Income Inequality

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Consumption Inequality and Income Inequality
There indeed has to be a clear difference between consumption and income in order to analyse inequality conclusively. Both are the underlying welfare measure that quantifies the degree of inequality in a given country. Also, household surveys are generally used in analysing inequality measures that can keep track of either consumption expenditure or income. Most economies vary, and that dictates what type of measure can be used. From a logical point, the more affluent households consume less a less share of their income than poor households. It can also be argued that wealthier households have higher saving rates than poor ones. Hence, any analysis of inequality that is correlated to consumption automatically undervalues the level of inequality.
In addition, consumption inequality and income inequality are directly proportional. Any increase in income inequality leads to increased consumption inequality. Notably, rising inequality invokes contentious debates on various essential policy issues, although the debates usually rely on income data. Consumption might not necessarily track income inequality; therefore, there is a level of doubt on the quality of data that has to be addressed. Most of the surveys conducted omit specific critical components of consumption.
Furthermore, the biggest question of concern is whether there is a better measure of income that can reverse the inaccurate conclusions made by household surveys regarding inequality trends. Truthfully, the only solution is getting better data that can improve and expand knowledge in analyzing inequality, especially in poor households. Similarly, one fact still holds ground that consumption data is a good metric for poverty, especially in developing economies. Emerging economies emphasize wage employment over own-consumption; hence there is more dedication towards income statistics.
Truthfully, the author believes that inequality in food consumption is rising and that the low expenses on food are not related to health practice issues. Besides, various vital indicators can explain sharp differences in inequality. There is a diminishing relative quality of income statistics and a growing gap between consumption inequality and income inequality. In a situation whereby consumption and income inequality measures move unilaterally, there is usually no presumption that the situation remains the same. Hence, there are more investments needed. They should be announced to ensure stability and high-quality analysis of inequality which might help public policy formulation and implementation processes.
The authors think that consumption inequality is a threat to economic stability. They could be right, but there are various factors that dismantle their arguments. The writers are motivated by implicit criticisms of a capitalist economic model. However, from a laissez-faire capitalist approach, consumption inequality serves as a fuel for growth and maintaining economic stability. Critically, the authors are oblivious to include leisure as a metric of inequality. Primarily, because consumption and income are different elements in the analysis, the quality of data is questionable. Similarly, for both consumption and income to be relevant and fair, the authors ought to identify instant casual apparatuses that created the unequal results deemed unfair and maybe oppressive.
Concisely, the authors are spot on in most parts of their discussion. It is true that increasing income inequality automatically leads to increased consumption disparities. The discussion is cleverly done and is objective with solid arguments. Additionally, an increase in leisure inequality quantity essentially means that there is increased income disparity realized in the economy that leads to high consumption inequality.

References
Attanasio, O. P., & Pistaferri, L. (2016). Consumption inequality. Journal of Economic Perspectives, 30(2), 3-28.

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