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Wealth effects on consumption across the wealth distribution: empirical evidence

Author

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  • Savignac, Frédérique
  • Arrondel, Luc
  • Lamarche, Pierre

Abstract

This paper studies the heterogeneity of the marginal propensity to consume out of wealth using French household surveys. We find decreasing marginal propensity to consume out of wealth across the wealth distribution for all net wealth components. The marginal propensity to consume out of financial assets tends to be higher compared with the effect of housing assets, except in the top of the wealth distribution. Consumption is less sensitive to the value of the main residence than to other housing assets. We also investigate the heterogeneity arising from indebtedness and from the role of housing assets as collateral. JEL Classification: D12, E21, C21

Suggested Citation

  • Savignac, Frédérique & Arrondel, Luc & Lamarche, Pierre, 2015. "Wealth effects on consumption across the wealth distribution: empirical evidence," Working Paper Series 1817, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20151817
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    References listed on IDEAS

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    Cited by:

    1. Le Blanc, Julia & Lydon, Reamonn, 2019. "Indebtedness and spending: What happens when the music stops?," Research Technical Papers 14/RT/19, Central Bank of Ireland.
    2. Özlem Onaran & Cem Oyvat & Eurydice Fotopoulou, 2019. "The effects of gender inequality, wages, wealth concentration and fiscal policy on macroeconomic performance," FMM Working Paper 50-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. de Bondt, Gabe & Gieseck, Arne & Zekaite, Zivile & Herrero, Pablo, 2019. "Disaggregate income and wealth effects in the largest euro area countries," Working Paper Series 2343, European Central Bank.
    4. Mr. Juan Sole & Ali Alichi & Mr. Kory Kantenga, 2016. "Income Polarization in the United States," IMF Working Papers 2016/121, International Monetary Fund.
    5. Guerrieri, Cinzia & Mendicino, Caterina, 2018. "Wealth effects in the euro area," Working Paper Series 2157, European Central Bank.
    6. Nicolas Albacete & Peter Lindner, 2017. "How strong is the wealth channel of monetary policy transmission? A microeconometric evaluation for Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q2/17, pages 32-53.
    7. Hou, Zhezhi & Jin, Man & Kumbhakar, Subal C., 2020. "Productivity spillovers and human capital: A semiparametric varying coefficient approach," European Journal of Operational Research, Elsevier, vol. 287(1), pages 317-330.
    8. Thomas Crossley & Peter Levell & Stavros Poupakis, 2019. "Regression with an Imputed Dependent Variable," IFS Working Papers W19/16, Institute for Fiscal Studies.
    9. Mr. Daniel Garcia-Macia, 2018. "Household Wealth and Resilience to Financial Shocks in Italy," IMF Working Papers 2018/196, International Monetary Fund.
    10. Kacper Grejcz & Zbigniew Żółkiewski, 2017. "Household wealth in Poland: the results of a new survey of household finance," Bank i Kredyt, Narodowy Bank Polski, vol. 48(3), pages 295-326.
    11. Frédérique Savignac, 2017. "Do wealth inequalities have an impact on consumption?," Rue de la Banque, Banque de France, issue 42, april..
    12. Pedro S. Amaral, 2017. "Monetary Policy and Inequality," Economic Commentary, Federal Reserve Bank of Cleveland, issue January.
    13. Francisco Camões & Sofia Vale, 2020. "I feel wealthy: A major determinant of Portuguese households’ indebtedness?," Empirical Economics, Springer, vol. 58(4), pages 1953-1978, April.

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    More about this item

    Keywords

    consumption; household survey; Marginal propensity to consume out of wealth; Policy distributive effects;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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