Heterogeneous wealth effects

Dimitris Christelis, Dimitris Georgarakos, Tullio Jappelli (), Luigi Pistaferri and Maarten van Rooij

European Economic Review, 2021, vol. 137, issue C

Abstract: We measure wealth effects on consumption using a novel research design: responses to direct survey questions asking how much a household would change consumption in response to unexpected (positive and negative) shocks to own home value. The average wealth effect is in the 2-5% range, in line with econometric estimates that associate changes in housing wealth with consumption realizations. However, our analysis uncovers significant heterogeneity. Extensive margin responses are limited: more than 90% of the sample reports no consumption adjustment to wealth shocks. On the other hand, conditioning on adjusting, intensive margin responses are substantial. Finally, the consumption response to positive wealth shocks is greater than the response to negative shocks, as suggested by the collateral channel mechanism of transmission between wealth shocks and consumption.

Keywords: Wealth effect; Housing; Heterogeneity (search for similar items in EconPapers)
JEL-codes: D12 D14 E21 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Heterogeneous Wealth Effects (2020)
Working Paper: Heterogeneous Wealth Effects (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:137:y:2021:i:c:s0014292121001525

DOI: 10.1016/j.euroecorev.2021.103805

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