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Heterogeneous Wealth Effects

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  • Christelis, Dimitris
  • Georgarakos, Dimitris
  • Pistaferri, Luigi
  • Van Rooij, Maarten

Abstract

We measure wealth effects on consumption using a novel research design: responses to direct survey questions asking how much a household would change consumption in response to unexpected (positive and negative) shocks to own home value. The average wealth effect is in the 2-5% range, in line with econometric estimates that associate changes in housing wealth with consumption realizations. However, our analysis uncovers significant heterogeneity. Extensive margin responses are limited: more than 90% of the sample reports no consumption adjustment to wealth shocks. On the other hand, conditioning on adjusting, intensive margin responses are substantial. Finally, the consumption response to positive wealth shocks is greater than the response to negative shocks.

Suggested Citation

  • Christelis, Dimitris & Georgarakos, Dimitris & Pistaferri, Luigi & Van Rooij, Maarten, 2020. "Heterogeneous Wealth Effects," CEPR Discussion Papers 14453, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14453
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    • Dimitris Christelis & Dimitris Georgarakos & Tullio Jappelli & Luigi Pistaferri & Maarten van Rooij, 2020. "Heterogeneous Wealth Effects," Working Papers 2020_20, Business School - Economics, University of Glasgow.

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    2. Charles Ka Yui LEUNG, 2022. "Housing and Macroeconomics," ISER Discussion Paper 1197, Institute of Social and Economic Research, Osaka University.
    3. Victor Dragotă, 2022. "How Important is the Time Value of Money in Decision Making? Results of an Experiment," Prague Economic Papers, Prague University of Economics and Business, vol. 2022(3-4), pages 259-275.
    4. Choi, Kyoung Jin & Jeon, Junkee & Koo, Hyeng Keun, 2022. "Intertemporal preference with loss aversion: Consumption and risk-attitude," Journal of Economic Theory, Elsevier, vol. 200(C).

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    More about this item

    Keywords

    Wealth effect; Housing; Heterogeneity;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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