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Testing consumers' asymmetric reaction to wealth changes

Author

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  • Mauro Mastrogiacomo

    (CPB Netherlands Bureau for Economic Policy Analysis)

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.

Suggested Citation

  • Mauro Mastrogiacomo, 2006. "Testing consumers' asymmetric reaction to wealth changes," CPB Discussion Paper 53, CPB Netherlands Bureau for Economic Policy Analysis.
  • Handle: RePEc:cpb:discus:53
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    References listed on IDEAS

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    Citations

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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. Wim Suyker, 2006. "Nuancing the favourable assessments of the Nordic economies," CPB Memorandum 153, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Mauro Mastrogiacomo, 2010. "Testing Consumers' Asymmetric Perception Of Changes In Household Financial Situation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(2), pages 327-350, June.
    4. F. J. H. Don & J. P. Verbruggen, 2006. "Models and methods for economic policy: 60 years of evolution at CPB," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 60(2), pages 145-170.
    5. 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.

    More about this item

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D10 - Microeconomics - - Household Behavior - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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