Consumption Inequality in the Digital Age

51 Pages Posted: 25 Feb 2022 Last revised: 17 Aug 2023

See all articles by Kai Arvai

Kai Arvai

Banque de France

Katja Mann

Copenhagen Business School

Multiple version iconThere are 2 versions of this paper

Date Written: December 23, 2021


This paper studies how digitalization affects consumption inequality. While previous literature has documented that technological change leads to U-shaped income polarization, we show that this pattern does not translate into consumption or welfare. This is due to price changes that are more beneficial for richer households. By assembling a novel dataset of digital technology in consumption, we establish several new stylized facts: First, high-income households consume a larger share of digitally produced products. Second, consumption items that rely more on digital inputs witness lower price inflation. Third, high-income households spend a larger share of their time on digital-intensive activities. Building on these findings, we present a structural model that quantifies the impact of digitalization on consumption inequality. The model weighs U-shaped income polarization against inflation rates that decrease with income. As a result, the welfare response to digitalization is J-shaped.

Keywords: Digitalization, inequality, consumption, income, automation

JEL Classification: E21, E22, J31, O33, O41

Suggested Citation

Arvai, Kai and Mann, Katja, Consumption Inequality in the Digital Age (December 23, 2021). Available at SSRN: or

Kai Arvai

Banque de France ( email )


Katja Mann (Contact Author)

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000

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