How does the degree of inequality affect the marginal propensity to consume? Income distribution and family consumption in Brazil based on 2002-2003 and 2008-2009 HBS data

Abstract

The paper intends to analyze the relationship between changes in income distribution and the impacts of these changes on the marginal propensity to consume for the economy as a whole. Data from the last two household budget surveys (HBS) realized in Brazil (2002-2003 and 2008-2009) are utilised, by taking the total household income and computing a total household expenditure variable for the two surveys. The Gini indexes for total household income and estimates for the aggregate marginal propensity to consume are presented, via microdata and hundredths of the population. In addition, polygonals are adjusted with the intention of capturing the differences between the marginal propensities to consume of two major groups of income. Some counter-factual manipulations are made to measure the impact of redistributive effects free other influences on the aggregate marginal propensity to consume.

Keywords:
Income distribution; Inequality; Consumption; Marginal propensity to consume; Household budget survey