Consumption and Income Inequality across Generations

This paper characterizes the joint evolution of income and consumption inequality across generations. We estimate a model featuring intergenerational persistence and family-independent idiosyncratic heterogeneity. We find that inequality in income and consumption is predominantly driven by idiosyncratic factors rather than intergenerational linkages. We show evidence of consumption insurance against idiosyncratic lifetime income risk, particularly for the bottom and top quartiles of income. Parental income is a significant source of this insurance only for the richest quartile.