The distribution of wealth and the marginal propensity to consume
Jiri Slacalek () and
Kiichi Tokuoka ()
No 1655, Working Paper Series from European Central Bank
We present a macroeconomic model calibrated to match both microeconomic and macroeconomic evidence on household income dynamics. When the model is modified in a way that permits it to match empirical measures of wealth inequality in the U.S., we show that its predictions (unlike those of competing models) are consistent with the substantial body of microeconomic evidence which suggests that the annual marginal propensity to consume (MPC) is much larger than the 0.02_0.04 range implied by commonly-used macroeconomic models. Our model also (plausibly) predicts that the aggregate MPC can differ greatly depending on how the shock is distributed across categories of households (e.g., low-wealth versus high-wealth households). JEL Classification: D12, D31, D91, E21
Keywords: consumption dynamics; microfoundations; MPC; wealth inequality (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-pbe
References: Add references at CitEc
Citations: View citations in EconPapers (46) Track citations by RSS feed
Downloads: (external link)
Journal Article: The distribution of wealth and the marginal propensity to consume (2017)
Working Paper: The Distribution of Wealth and the Marginal Propensity to Consume (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20141655
Access Statistics for this paper
More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().