Tuesday, September 12, 2006

Keep it handy

Jonathan D. Fisher and David S. Johnson just published "Consumption Mobility in the U.S.: Evidence from Two Panel Sets" Here is their abstract:

"This paper examines inequality and mobility using measures of income and consumption. Consumption is claimed to be a better measure of permanent income and thus well-being, but most studies of inequality and mobility using U.S. data use income.

"This paper uses cohort data from the Consumer Expenditure Surveys on total consumption to impute consumption in the Panel Study of Income Dynamics. Then, we use this imputed consumption and actual income from the PSID to examine changes in inequality and mobility. Similar to earlier findings, we show that there has been a large increase in income inequality but no concurrent increase in consumption inequality in the 1990s. Conversely, income mobility and consumption mobility are similar during this time period.

"Finally, we link the concepts of inequality and mobility using a social welfare function. The results suggest that income mobility and consumption mobility more than offset the increases in inequality."

Straight intertemporal comparisons of groups that do not include the same people -- only to set up great displays of profound concern over the findings -- is one of the most bone-headed plays in our popular discourse.

So, keep Fisher and Johnson's paper nearby.