Testing consumers' asymmetric reaction to wealth changes

Mauro Mastrogiacomo

No 53, CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: This study contains several tests to show that individuals overreact to negative wealth changes, relative to positive wealth changes. This study contains several tests to show that individuals overreact to negative wealth changes, relative to positive wealth changes. This asymmetry, that is found using micro data, suggests that economists should not treat symmetrically the relation between economic variables (consumption for instance) and wealth in their models when wealth decreases. We find that this asymmetry increases with age and picks at retirement.

JEL-codes: D01 D10 D84 J14 (search for similar items in EconPapers)
Date: 2006-01
New Economics Papers: this item is included in nep-cbe and nep-fmk
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Citations: View citations in EconPapers (7)

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