# Consumer expenditure and inequality: a budget components analysis using the Gini coefficient.

Economists in the Bureau of Labor Statistics' Division of
Consumer Expenditure Surveys and Division of Price and Index Number
Research analyze Consumer Expenditure data in a variety of ways. The
following are summaries of this research that were presented at various
professional conferences during 1987 and 1988. To receive a full copy
of one or more of the papers, write the author, care of Bureau of Labor
Statistics, 600 E Street, N.W. (4th floor), Washington, DC 20212.
Thesia 1. Garner,"Consumer Expenditure and Inequal

ity: A Budget Components Analysis Using the Gini Coefficient," presented at the Southern Economic Association Meetings in Washington, DC, November 22-24, 1987.

In this paper, the material well-being of the population, as defined by consumption expenditures, is evaluated in terms of the inequality of consumption expenditures across consumer units representative of the U.S. urban population in 1982-83. The Gini coefficient is used as the measure of inequality: the higher the Gini value, the greater the inequality. Gini coefficients are produced for all consumer units as a group and for socioeconomic and demographic subgroups of the population. The Gini coefficient is decomposed by budget components to examine the effects by component on overall consumption expenditures inequality. The Lerman and Yitzhaki covariance method is employed to calculate Gini estimates; these estimates are more accurate than would have been possible with other methods, because microlevel, and not grouped, data are required.

An overall Gini value of .322 results from a population estimate of inequality based on consumption expenditures. This is comparable to, although slightly lower than, estimates based on income. Differences among subgroups of the population are examined. The most inequality in expenditures is experienced by one-person consumer units, consumer units with reference persons age 65 or over, and those in which the reference person is of a race other than white or black. Consumers in the lowest quintile of income exhibit the most inequality in total expenditures.

The analysis by budget components reveals that certain expenditures contribute more to total inequality than do others. Results indicate that increases in expenditures for food, shelter, fuel and utilities, and medical care and services would lead to reductions in the overall inequality of consumption expenditures. An increase in private transportation expenditures would lead to the largest positive change in overall inequality.

The Lerman and Yitzhaki method is a valid procedure to use when evaluating the inequality of consumption expenditures across consumer ,units. Plans for future research include an expansion of this study to evaluate the effects of changes in taxes and in prices on overall inequality. In addition, a user-cost or flow-of-services method for defining vehicle purchase expenditures and homeowners' payments for "implicit rent" will be considered.

When evaluating the impact of changes in taxes and government subsidies, policymakers and researchers must keep in mind the differential impact on subgroups of the population and differences that can result when expenditures for individual budget components change. Otherwise, the policies proposed and programs enacted could lead to greater inequality in economic well-being across consumer units in the population-not the desired result for a society which is averse to inequality.

ity: A Budget Components Analysis Using the Gini Coefficient," presented at the Southern Economic Association Meetings in Washington, DC, November 22-24, 1987.

In this paper, the material well-being of the population, as defined by consumption expenditures, is evaluated in terms of the inequality of consumption expenditures across consumer units representative of the U.S. urban population in 1982-83. The Gini coefficient is used as the measure of inequality: the higher the Gini value, the greater the inequality. Gini coefficients are produced for all consumer units as a group and for socioeconomic and demographic subgroups of the population. The Gini coefficient is decomposed by budget components to examine the effects by component on overall consumption expenditures inequality. The Lerman and Yitzhaki covariance method is employed to calculate Gini estimates; these estimates are more accurate than would have been possible with other methods, because microlevel, and not grouped, data are required.

An overall Gini value of .322 results from a population estimate of inequality based on consumption expenditures. This is comparable to, although slightly lower than, estimates based on income. Differences among subgroups of the population are examined. The most inequality in expenditures is experienced by one-person consumer units, consumer units with reference persons age 65 or over, and those in which the reference person is of a race other than white or black. Consumers in the lowest quintile of income exhibit the most inequality in total expenditures.

The analysis by budget components reveals that certain expenditures contribute more to total inequality than do others. Results indicate that increases in expenditures for food, shelter, fuel and utilities, and medical care and services would lead to reductions in the overall inequality of consumption expenditures. An increase in private transportation expenditures would lead to the largest positive change in overall inequality.

The Lerman and Yitzhaki method is a valid procedure to use when evaluating the inequality of consumption expenditures across consumer ,units. Plans for future research include an expansion of this study to evaluate the effects of changes in taxes and in prices on overall inequality. In addition, a user-cost or flow-of-services method for defining vehicle purchase expenditures and homeowners' payments for "implicit rent" will be considered.

When evaluating the impact of changes in taxes and government subsidies, policymakers and researchers must keep in mind the differential impact on subgroups of the population and differences that can result when expenditures for individual budget components change. Otherwise, the policies proposed and programs enacted could lead to greater inequality in economic well-being across consumer units in the population-not the desired result for a society which is averse to inequality.

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Title Annotation: | Consumer Expenditure Survey Conference paper summaries |
---|---|

Author: | Garner, Thesia I. |

Publication: | Monthly Labor Review |

Date: | Aug 1, 1988 |

Words: | 518 |

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