Spending by Bottom-80% U.S. Households Is Persistently Greater than Income. What Funds the Deficit?

Steve Roth

MPRA Paper from University Library of Munich, Germany

Abstract: This paper explores economic measures that are surprisingly hard to assemble: US household income quintiles’ annual spending relative to annual income. The total sector’s income-minus-spending surplus is heavily dominated by the top 20%. The bottom 80% runs persistent spending deficits, implying ongoing asset disaccumulation; the bottom 80%’s annual “propensity” to spend relative to income, or spending multiplier, is greater than one. This spending deficit is found to be largely explained or “funded” by two additional asset sources that are not included in income: borrowing from the financial/banks sector, and — to a far greater extent — capital gains on asset holdings.

Keywords: propensity; marginal; income; disposable income; personal income; capital gains; household; balance sheet; spending; saving; holding gains; borrowing; liabilities; assets; quintile; multiplier (search for similar items in EconPapers)
JEL-codes: D14 D31 E21 (search for similar items in EconPapers)
Date: 2021-11-13
New Economics Papers: this item is included in nep-cwa and nep-mac
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https://mpra.ub.uni-muenchen.de/110670/1/MPRA_paper_110670.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/113037/7/MPRA_paper_113037.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/113564/13/MPRA_paper_113564.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:110670

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