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Consumption Dynamics and Labor/Non-Labor Incomes

Author

Listed:
  • Belloc, Ignacio

    (University of Zaragoza)

  • Molina, José Alberto

    (University of Zaragoza)

  • Velilla, Jorge

    (University of Zaragoza)

Abstract

This paper examines the transmission of labor and non-labor income to household consumption. To do so, we develop a dynamic model of collective household behavior, and estimate consumption Euler equations using cross-country data from the EU-SILC for 11 European countries over 2006–2019. Results indicate different consumption dynamics depending on the source of the income and the identity of the recipient, which reflects separate preferences over goods among husbands and wives. The household economic environment affects consumption with persistence, as predicted by models with limited commitment. We find small consumption responses to non-labor incomes, which tend to be transitory and infrequent payments. The results also suggest that women are more risk averse, as the consumption response to wife wages is smaller than the response to husband wages. These findings contribute to the literature on consumption dynamics by providing harmonized cross-country evidence for Europe.

Suggested Citation

  • Belloc, Ignacio & Molina, José Alberto & Velilla, Jorge, 2026. "Consumption Dynamics and Labor/Non-Labor Incomes," IZA Discussion Papers 18982, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18982
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    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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