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Stock Market Wealth and Consumption

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Author Info
James M. Poterba

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Abstract

This paper explores the link between changes in the aggregate value of corporate stock and changes in consumer spending. It presents data on the distribution of corporate stock ownership based on the 1998 Survey of Consumer Finances. It also uses time-series evidence on the comovement of stock market wealth and various categories of consumer spending to calibrate "the wealth effect." It concludes that in the year after a change in stock market values, consumer spending is likely to rise by between one and two cents for each dollar increase in the value of corporate stock.

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Publisher Info
Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 14 (2000)
Issue (Month): 2 (Spring)
Pages: 99-118
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Handle: RePEc:aea:jecper:v:14:y:2000:i:2:p:99-118

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Jonathan S. Skinner, 1996. "Is Housing Wealth a Sideshow?," NBER Chapters, in: Advances in the Economics of Aging, pages 241-272 National Bureau of Economic Research, Inc. [Downloadable!]
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  2. William G. Gale & John Sabelhaus, 1999. "Perspectives on the Household Saving Rate," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1999-1), pages 181-224. [Downloadable!]
  3. Martha Starr-McCluer, 1998. "Stock market wealth and consumer spending," Finance and Economics Discussion Series 1998-20, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  4. F. Thomas Juster & Joseph Lupton & James P. Smith & Frank Stafford, 2004. "Savings and Wealth; Then and Now," Labor and Demography 0403027, EconWPA. [Downloadable!]
  5. Jonathan A. Parker, 1999. "Spendthrift in America? On Two Decades of Decline in the U.S. Saving Rate," NBER Working Papers 7238, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Sydney Ludvigson & Charles Steindel, 1999. "How important is the stock market effect on consumption?," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 29-51. [Downloadable!]
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  7. Romer, Christina D, 1990. "The Great Crash and the Onset of the Great Depression," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 597-624, August. [Downloadable!] (restricted)
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  8. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "The Carnegie Conjecture: Some Empirical Evidence," NBER Working Papers 4118, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Engelhardt, Gary V., 1996. "House prices and home owner saving behavior," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 313-336, June. [Downloadable!] (restricted)
  10. repec:fth:prinin:413 is not listed on IDEAS
  11. Bhatia, Kul B, 1972. "Capital Gains and the Aggregate Consumption Function," American Economic Review, American Economic Association, vol. 62(5), pages 866-79, December. [Downloadable!] (restricted)
  12. Roger W. Ferguson, 1999. "Opening remarks," Proceedings, Federal Reserve Bank of Chicago, issue Oct, pages 50-56. [Downloadable!]
  13. Wolff, Edward N, 1998. "Recent Trends in the Size Distribution of Household Wealth," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 131-50, Summer. [Downloadable!] (restricted)
  14. Alan Krueger, 1999. "Measuring Labor's Share," Working Papers 792, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  15. Richard K. Green, 1999. "Stock Prices and House Prices in California: New Evidence of a Wealth Effect? A Note," Wisconsin-Madison CULER working papers 99-09, University of Wisconsin Center for Urban Land Economic Research. [Downloadable!]
  16. Joseph Tracy & Henry Schneider & Sewin Chan, 1999. "Are stocks overtaking real estate in household portfolios?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Apr. [Downloadable!]
  17. F. Brayton & P. Tinsley, 1996. "A guide to FRB/US: a macroeconomic model of the United States," Finance and Economics Discussion Series 96-42, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  18. Guido W. Imbens & Donald B. Rubin & Bruce Sacerdote, 1999. "Estimating the Effects of Unearned Income on Labor Supply, Earnings, Savings, and Consumption: Evidence from a Survey of Lottery Players," NBER Working Papers 7001, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  19. James M. Poterba & David A. Wise, 1998. "Individual Financial Decisions in Retirement Saving Plans and the Provision of Resources for Retirement," NBER Chapters, in: Privatizing Social Security, pages 363-401 National Bureau of Economic Research, Inc. [Downloadable!]
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