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Wealth Allocation, Capital Gains and Private Expenditure in the UK

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  • Molana, H

Abstract

The end of the period stock of net wealth is usually thought to be important for agents' flow-of-funds decisions. Its relevance for modeling the aggregate consumption function is mainly due to two factors: (1) the choice between consumption and accumulation, and (2) the capital gains from accumulation. This paper specifies a dynamic empirical relationship that takes account of these factors. The variables in the author's data set are those that previous studies have found to be theoretically most relevant but have, one way or another, failed to incorporate them empirically. The suggested model, therefore, can be seen as a generalization of the existing ones; in addition to personal disposable income, it introduces personal wealth, its relative price, and rate of return as determinants of the expenditure on nondurable goods and services. The U.K. evidence supports this generalization. Copyright 1989 by Scottish Economic Society.

Suggested Citation

  • Molana, H, 1989. "Wealth Allocation, Capital Gains and Private Expenditure in the UK," Scottish Journal of Political Economy, Scottish Economic Society, vol. 36(3), pages 209-237, August.
    • Handle: RePEc:bla:scotjp:v:36:y:1989:i:3:p:209-37
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    Cited by:

    1. Mario Cerrato & Christian De Peretti & Chris Stewart, 2013. "Is The Consumption–Income Ratio Stationary? Evidence From Linear And Non-Linear Panel Unit Root Tests For Oecd And Non-Oecd Countries," Manchester School, University of Manchester, vol. 81(1), pages 102-120, January.
    2. Mario Cerrato & Christian de Peretti & Chris Stewart, 2008. "Is the consumption-income ratio stationary? Evidence from a nonlinear panel unit root test for OECD and non-OECD countries," Working Papers 2008_27, Business School - Economics, University of Glasgow.

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