We examine linkages between aggregate household income, distribution of that income, and aggregate cross-country expenditure patterns. We are able to decompose income effects into international income dispersion effects (from variations in average income) and national income dispersion (income distribution) effects. This yields insights for relevant aggregate household specifications in computational policy models emphasizing household distribution of income. This also yields a consumption-pattern based inequality index that summarizes the projection of inequality through expenditure patterns. Estimation of flexible demand systems with representative expenditures (which reflects income distribution within countries) yields a significant relationship between representative consumption and cross-country demand patterns.

Engel curves, aggregate demand, demand system estimation, income distribution
Computable General Equilibrium Models (jel C68), Consumer Economics: Empirical Analysis (jel D12), Personal Income, Wealth, and Their Distributions (jel D31), Equity, Justice, Inequality, and Other Normative Criteria and Measurement (jel D63)
Tinbergen Institute Discussion Paper Series
Tinbergen Institute

Fillat, C, & François, J.F. (2004). National and International Income Dispersion and Aggregate Expenditures (No. TI 04-093/2). Tinbergen Institute Discussion Paper Series. Retrieved from http://hdl.handle.net/1765/6617