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Wealth effects on consumption: microeconometric estimates from the Spanish survey of household finances

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  • Olympia Bover

    () (Banco de España)

Abstract

This paper presents estimates of wealth effects on consumer spending using the first wave of a new survey of Spanish household finances (EFF) that contains direct measures of asset holdings and consumption. A distinguishing feature of the EFF is the availability of such information from a representative sample subject to stratification by wealth. To control for the potential endogeneity of housing wealth, we exploit geographical house price variation and inheritance information in the EFF as instrumental variables. We focus on the effects of housing wealth, distinguishing between main and secondary housing, but also report OLS estimates of financial wealth effects. The pattern of wealth effects across age groups is also analyzed. We find large and statistically significant housing wealth effects for prime age households. Overall, the largest wealth effects are for owner occupied housing, followed by secondary housing, with financial wealth effects being smaller and insignificant.

Suggested Citation

  • Olympia Bover, 2005. "Wealth effects on consumption: microeconometric estimates from the Spanish survey of household finances," Working Papers 0522, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:0522
    as

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/05/Fic/dt0522e.pdf
    File Function: First version, August 2005
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. repec:kap:jrefec:v:56:y:2018:i:3:d:10.1007_s11146-017-9648-6 is not listed on IDEAS
    2. Bover, Olympia & Jimeno, Juan F, 2007. "House Prices and Employment Reallocation: International Evidence," CEPR Discussion Papers 6543, C.E.P.R. Discussion Papers.
    3. Hirukawa, Masayuki & Prokhorov, Artem, 2018. "Consistent estimation of linear regression models using matched data," Journal of Econometrics, Elsevier, vol. 203(2), pages 344-358.
    4. Atalay, Kadir & Whelan, Stephen & Yates, Judith, 2013. "Housing Wealth and Household Consumption: New Evidence from Australia and Canada," Working Papers 2013-04, University of Sydney, School of Economics.
    5. Yvonne McCarthy & Kieran McQuinn, 2016. "Attenuation Bias, Recall Error and the Housing Wealth Effect," Kyklos, Wiley Blackwell, vol. 69(3), pages 492-517, August.
    6. repec:eee:ecmode:v:72:y:2018:i:c:p:165-176 is not listed on IDEAS
    7. Maruška Vizek, 2011. "The Influence of Stock Market and Housing Wealth on Consumption Expenditures in Transition Countries," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 3(1).
    8. Barceló, Cristina & Villanueva, Ernesto, 2016. "The response of household wealth to the risk of job loss: Evidence from differences in severance payments," Labour Economics, Elsevier, vol. 39(C), pages 35-54.
    9. Savignac, Frédérique & Arrondel, Luc & Lamarche, Pierre, 2015. "Wealth effects on consumption across the wealth distribution: empirical evidence," Working Paper Series 1817, European Central Bank.
    10. Luc Arrondel & Pierre Lamarche & Frédérique Savignac, 2014. "Consommation et patrimoine des ménages : au‑delà du débat macroéconomique…," Économie et Statistique, Programme National Persée, vol. 472(1), pages 21-48.
    11. John N. Muellbauer, 2007. "Housing, credit and consumer expenditure," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 267-334.
    12. Cristina Barceló, 2008. "The impact of alternative imputation methods on the measurement of income and wealth: Evidence from the Spanish survey of household finances," Working Papers 0829, Banco de España;Working Papers Homepage.
    13. Eurosystem Household Finance and Consumption Network, 2013. "The Eurosystem Household Finance and Consumption Survey - Results from the first wave," Statistics Paper Series 2, European Central Bank.
    14. Bhatia, Kul & Mitchell, Chris, 2016. "Household-specific housing capital gains and consumption: Evidence from Canadian microdata," Regional Science and Urban Economics, Elsevier, vol. 56(C), pages 19-33.
    15. Luc Arrondel & Pierre Lamarche & Frédérique Savignac, 2017. "Does Inequality Matter for the Consumption-Wealth Channel? Empirical Evidence," CESifo Working Paper Series 6676, CESifo Group Munich.

    More about this item

    Keywords

    wealth effects; house prices; two-stage least squares matching;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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