MPC heterogeneity and household balance sheets

Andreas Fagereng, Martin B. Holm () and Gisle Natvik

Discussion Papers from Statistics Norway, Research Department

Abstract: Using Norwegian administrative data, we study how sizable lottery prizes affect household expenditure and savings. Expenditure responses (MPCs) spike in the year of winning, with a mean estimate of 0.35, and thereafter fall markedly. Controlling for all items on the household balance sheet and characteristics such as education and age, MPCs vary with the amount won and liquid assets only. Shock size matters: The MPC among the 25 percent winning least is twice as high as among the 25 percent winning most. Many households are wealthy, illiquid and have high MPCs, consistent with 2-asset models of consumer choice.

Keywords: marginal propensity to consume; household expenditure response; household heterogeneity; income shocks (search for similar items in EconPapers)
JEL-codes: D12 D14 D91 E21 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2016-11
New Economics Papers: this item is included in nep-acc and nep-mac
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Citations: View citations in EconPapers (27)

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Related works:
Journal Article: MPC Heterogeneity and Household Balance Sheets (2021)
Working Paper: MPC Heterogeneity and Household Balance Sheets (2018)
Working Paper: MPC heterogeneity and household balance sheets (2018)
Working Paper: MPC Heterogeneity and Household Balance Sheets (2017)
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