Consumption Inequality Life-Cycle Among Brazilian Households (a Evolucao Das Desigualdades De Renda E De Consumo Ao Longo Do Ciclo Da Vida)

Abstract

Consumption inequality measures tend to be much more accurate indicators of permanent disparities in welfare than income inequality measures. Furthermore, their evolution in time may be predicted from the theory. According to the permanent income hypothesis, consumption inequality should rise within a closed group of individuals. Other hypotheses may lead to the same conclusion, depending on the pattern of income temporal evolution. This paper presents measures of Brazilian income and consumption inequality among families grouped in cohorts and schooling levels. The results reveal that consumption and income inequality increased for most cohorts from 1986/87 to 1995/96. Families with young and educated heads presented an increase in consumption dispersion despite the observed reduction in income inequality, whereas for families with less educated heads inequality increased according to both measures. This may be explained by the existence of different credit constraints for each group.

Keywords: consumption and income inequality, permanent income hypothesis

JEL Classification: E21, D63, D11