European Business Schools Librarian's Group

Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics

Does income inequality affect aggregate consumption? Revisiting the evidence

Jesus Crespo Cuaresma (), Jozef Kubala () and Kristina Petrikova ()
Additional contact information
Jesus Crespo Cuaresma: Department of Economics, Vienna University of Economics and Business
Jozef Kubala: University of Economics in Bratislava
Kristina Petrikova: University of Economics in Bratislava

Abstract: The standard Keynesian view predicts that equalization of the income distribution leads to an increase in aggregate consumption. We revisit the analysis carried out by the seminal empirical contributions which test such a hypothesis using modern econometric methods and the most comprehensive dataset existing on income distribution measures. Our results indicate that there is no substantive empirical evidence of an effect of income inequality on aggregate consumption.

Keywords: Inequality, aggregate consumption, average propensity to consume

JEL-codes: E22; D31 January 2016

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