Consumption Heterogeneity: Micro Drivers and Macro Implications

Edmund Crawley and Andreas Kuchler

American Economic Journal: Macroeconomics, 2023, vol. 15, issue 1, 314-41

Abstract: We document heterogeneity in the marginal propensity to consume (MPC) across household characteristics relevant to understanding heterogeneous agent models and monetary policy transmission. We find a strong negative relationship between household liquid wealth and MPC. We show that household liquid wealth predicts MPC closely for every other household characteristic we look at. We use a new empirical method that overcomes sources of bias found in the existing literature, along with administrative data from Denmark that allow us to identify heterogeneous behavior. We use our results to analyze monetary policy transmission mechanisms in both Denmark and the United States.

JEL-codes: D12 D31 E21 E43 E52 G51 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (21)

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DOI: 10.1257/mac.20200352

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