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Wealth Shocks and MPC Heterogeneity

Dimitris Christelis (), Dimitris Georgarakos (), Tullio Jappelli (), Luigi Pistaferri () and Maarten van Rooij ()
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Luigi Pistaferri: Stanford University, SIEPR, NBER and CEPR

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

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.

Keywords: Wealth Shocks; Marginal Propensity to Consume; Housing; Heterogeneity (search for similar items in EconPapers)
JEL-codes: D12 D14 E21 (search for similar items in EconPapers)
Date: 2019-02-15
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Forthcoming in The Economic Journal

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Working Paper: Wealth shocks and MPC heterogeneity (2019) Downloads
Working Paper: Wealth Shocks and MPC Heterogeneity (2019) Downloads
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