Consumption Inequality in the Digital Age

56 Pages Posted: 25 Feb 2022 Last revised: 26 Apr 2024

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: April 26, 2024

Abstract

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 consumption and welfare responses resemble a J-shape. This is due to changes in
consumer prices, which are more favorable for high earners. By assembling a novel dataset
of digital technology in consumption, we establish that high-income households consume a
larger share of digitally produced products, and that these products witness lower inflation. In
a structural model that jointly considers income and price changes, we quantify the impact of
digitalization on consumption inequality between 1960-2017.

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 (April 26, 2024). Available at SSRN: https://ssrn.com/abstract=3992247 or http://dx.doi.org/10.2139/ssrn.3992247

Kai Arvai

Banque de France ( email )

Paris
France

Katja Mann (Contact Author)

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

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