Skip to main content

Inequality in 3-D: Income, Consumption, and Wealth

System Working Paper 18-14 | Published May 15, 2018

Download PDF

Authors

Jonathan Fisher Stanford University

David Johnson University of Michigan

Timothy Smeeding University of Wisconsin-Madison

Jeffrey Thompson Board of Governors of the Federal Reserve System

Inequality in 3-D: Income, Consumption, and Wealth

Abstract

We do not need to and should not have to choose amongst income, consumption, or wealth as the superior measure of well-being. All three individually and jointly determine well-being. We are the first to study inequality in three conjoint dimensions for the same households, using income, consumption, and wealth from the 1989-2016 Surveys of Consumer Finances (SCF). The paper focuses on two questions. What does inequality in two and three dimensions look like? Has inequality in multiple dimensions increased by less, by more, or by about the same as inequality in any one dimension? We find an increase in inequality in two dimensions and in three dimensions, with a faster increase in multi-dimensional inequality than in one-dimensional inequality. Viewing inequality through one dimension greatly understates the level and the growth in inequality in two and three dimensions. The U.S. is becoming more economically unequal than is generally understood.