CONSUMPTION, NEEDS AND INEQUALITY

Most empirical studies demonstrating a U-turn in inequality in the Uni ted States are based on the distribution of income. However, utility i s derived from the consumption of goods and services and there are man y reasons to expect the distribution of expenditure to be different fr om the distribution of income. We demonstrate that consumption-based i nequality indexes actually decrease over the postwar era. This conclus ion differs from the stylized facts because of differences in the inco me and expenditure distributions. Differences also arise from the incl usion of equivalence scales to account for the different needs of hete rogeneous households.