Some Uses of CE 

"Using Consumer Theory to Test Business Cycle Model(with Pete Klenow, JPE, 1998) ● Engel Curves to Predict Employment Cyclicality by Good ● Durable luxuries cyclical employment, productivity, and p

— support for cyclical factor utilization 
"Quantifying Quality Growth" (with Pete Klenow, AER, 

● Estimate Quality Engel Curves for Durables ● Use Quality Engel Curves as instrument for Quality ● Predicts Unit-Price inflation 1980-1996 across goods ● Also Predicts CPI inflation across goods 
-1.0

-0.5

0.0

0.5

1.0

-1.0 -0.5 0.0 0.5 1.0

real price of car purchased (in logs)

household real nondurable consumption (in logs)

OLS

Kernel

Quality Engel Curve for CARS

Figure 3
-0.2

-0.1

0.0

0.1

0.2

0.3

-1.0 -0.5 0.0 0.5 1.0

real price of vacuum purchased (in logs)

household real nondurable consumption (in logs)

Quality Engel Curve for VACUUMS

OLS

Kernel

Figure 4
-10

-5

0

5

0.0 0.2 0.4 0.6 0.8 1.0 1.2

Quality Slope

1980-1996 Unit Price Inflation

Figure 5

corr = .51
"Has Consumption Inequality Mirrored Income Inequali

(with Mark Aguiar, 2010)

● Large increase in income inequality over last 30 years 

● Consumption inequality, measured by CE, rose much less 

— e.g., Slesnick (2001), Krueger and Perri (2006) 

● Use budget constraint and CE data on savings to check co● Use Engel curves across goods for alternative measure 

— Corrects for systematic errors by good or income 
Implied Consumption Inequality

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

1980 1983 1986 1989 1992 1996 1999 2002 2005

Log Change from 1980-82

After Tax Income
Implied Consumption Inequality

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

1980 1983 1986 1989 1992 1996 1999 2002 2005

Log Change from 1980-82

After Tax Income

Reported

Expenditure
Implied Consumption Inequality

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

1980 1983 1986 1989 1992 1996 1999 2002 2005

Log Change from 1980-82

After Tax Income

Reported

Expenditure

Y-S
Two Good Example: Food and Entertainment

0

1

2

3

4

5

6

7

8

9

1980 1983 1986 1989 1992 1996 1999 2002 2005

R elative Spending

YEAR

Nondurable

Entertainment

Total

Expenditure

Food at

Home
Implied Consumption Inequality

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

1980 1983 1986 1989 1992 1996 1999 2002 2005

Log Change from 1980-82

After Tax Income

Reported

Expenditure

Y-S
Implied Consumption Inequality

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

1980 1983 1986 1989 1992 1996 1999 2002 2005

Log Change from 1980-82

After Tax Income

Reported

Expenditure

Estimated 

Expenditure

Y-S
Description of Data Used

● Panel feature of data 

— to match expenditures to income — to instrument across surveys to address measurement 

● All available years (including 1972-73) to uncover long-te● Interview files: Family, ITAB, and MTAB files 

(MTABS for finer disaggregation, for unit prices for durab
Suggestions for CE Survey and Produc

For many questions aggregate household consumption is ● Exploit household budget constraint as check ● Begin with estimate aggregate expenditures 

— bring records of check, credit spending, estimate curre

● Then drop number of questions that generate little expendi
For many questions need CE’s short panel 

— match income/spending, estimate life cycle or allow fixed ● Reductions in attrition would be great ● Bring in households only for full cycle ● Make existing years easier to use as panel 

— e.g., consistent set of ID’s across census changes — perhaps produce panel version