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Asymmetric Consumption Effects of Transitory Income Shocks

Author

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

Abstract

We use the responses of a representative sample of Dutch households to survey questions that ask how much they would consume of an unexpected, transitory, and positive income change, and by how much they would reduce their consumption in response to an unexpected, transitory, and negative income change. The questionnaire distinguishes between relatively small income changes (a one-month increase or drop in income), and relatively larger ones (equal to three months of income). The results are broadly in line with models of intertemporal choice with precautionary saving, borrowing constraints, and finite horizons.

Suggested Citation

  • Christelis, Dimitris & Georgarakos, Dimitris & Jappelli, Tullio & Pistaferri, Luigi & Van Rooij, Maarten, 2017. "Asymmetric Consumption Effects of Transitory Income Shocks," CEPR Discussion Papers 12025, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12025
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    References listed on IDEAS

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    More about this item

    Keywords

    Transitory Income Shocks; Positive and Negative Income Shocks; Marginal Propensity;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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