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Testing consumers' asymmetric reaction to wealth changes

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  • Mauro Mastrogiacomo

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    Abstract

    This study contains several tests to show that individuals overreact to negative wealth changes, relative to positive wealth changes. This asymmetry, that is found using micro data, suggests that economists should not treat symmetrically the relation between economic variables (consumption for instance) and wealth in their models when wealth decreases. We find that this asymmetry increases with age and picks at retirement.

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    Bibliographic Info

    Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 53.

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    Date of creation: Jan 2006
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    Handle: RePEc:cpb:discus:53

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    16. Mauro Mastrogiacomo & Rob Alessie & Maarten Lindeboom, 2004. "Retirement behaviour of Dutch elderly households," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 777-793.
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    Cited by:
    1. Robert-Paul Berben & Kerstin Bernoth & Mauro Mastrogiacomo, 2007. "Households' response to wealth changes: do gins or losses make a difference?," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Proceedings of the IFC Conference on "Measuring the financial position of the household sector", Basel, 30-31 August 2006 - Volume 1, volume 25, pages 145-160 Bank for International Settlements.
    2. Henk Kranendonk & Johan Verbruggen, 2007. "SAFFIER; a multi-purpose model of the Dutch economy for short-term and medium-term analyses," CPB Document 144, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Wim Suyker, 2006. "Nuancing the favourable assessments of the Nordic economies," CPB Memorandum 153, CPB Netherlands Bureau for Economic Policy Analysis.

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