Economic Inequality and Consumer Behaviour: Theory and Applications

Although the theory of economic inequality (or equivalently income distribution) plays a crucial role in positive and normative economics (Tinbergen, 1975) and is causally related to (a) the allocation of earned incomes, (b) the concentration of wealth, and (c) the relative importance of income from earnings and capital (Atkinson, 1983), an integration of economic inequality and consumer behaviour in empirical studies has not been widely reported in the literature on demand analysis (see, for example, Berndt, Darrough and Diewert, 1977, Deaton and Muellbauer, 1980). Lacking in empirical studies are also investigations into the effects of the shape of the Lorenz curve on the measurement of household income for use in economic policy evaluation and comparison.