Decomposing the Wealth Effect on Consumption

Monica Paiella and Luigi Pistaferri
Additional contact information
Monica Paiella: University of Naples “Parthenope”
Luigi Pistaferri: Stanford University, SIEPR, NBER, and CEPR

The Review of Economics and Statistics, 2017, vol. 99, issue 4, 710-721

Abstract: We decompose the wealth effect on consumption into two components. First, we distinguish between exogenous and endogenous wealth changes. Second, we distinguish between anticipated and unanticipated exogenous changes. We estimate the impact of exogenous components using data from the 2008—2010 panel of the Italian Survey of Household Income and Wealth. The wealth effect is about 3 cents per (unexpected) euro increase in wealth and driven by house price changes. The consumption response to anticipated changes in wealth is of similar magnitude and also driven by housing. We show that these findings are consistent with binding borrowing constraints.

Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (51)

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00629 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:99:y:2017:i:4:p:710-721

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by The MIT Press ().