Wealth Shocks and MPC Heterogeneity

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

No 25999, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use the responses of a representative sample of Dutch households to survey questions that ask how much their consumption would change in response to unexpected, permanent, positive or negative shocks to their home value. The average MPC is in the 2.1-4.7% range, in line with econometric estimates that use housing wealth and consumption realizations. However, our analysis uncovers significant sample heterogeneity, with over 90% of the sample reporting no consumption adjustment to positive or negative wealth shocks. The relation between the MPC from wealth shocks and cash-on-hand is negative, consistent with models with precautionary saving and liquidity constraints.

JEL-codes: D12 D14 E21 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-mac
Note: EFG
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Citations: View citations in EconPapers (7)

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