The Intergenerational Correlation of Consumption Expenditures

Using
data recently collected by the Panel Study of Income Dynamics, we find that the
intergenerational correlation in expenditures is no larger than that in income,
suggesting limited intra-family risk-sharing.
On the other hand, even after controlling for the intergenerational
correlation in income, the expenditures correlation remains significant. This
suggests that other factors such as preferences, access to credit, and
non-pecuniary inter vivos transfers potentially played a role in consumption
smoothing across generations within a family. We also find that the correlation
coefficients estimated using food and imputed total expenditures are smaller
than that estimated using the measured total expenditures.