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Consumption responses to inheritances: The role of durable goods

Author

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  • Belloc, Ignacio
  • Molina, José Alberto
  • Velilla, Jorge

Abstract

This paper studies the impact of inheritances, a key component in household wealth accumulation, on consumption. Specifically, we investigate how inheritances influence household consumption growth, distinguishing durable and nondurable goods. In doing so, we use data from the Panel Study of Income Dynamics spanning 2005–2019. The results reveal a positive effect of inheritances on household consumption of durable goods. Such an effect occurs immediately after receiving the inheritance and its average magnitude is about 27 %. Estimates also reveal that large inheritances significantly impact the consumption growth of durables, but also of non-durables, while small inheritances show no effects. Consumption responses are stronger among liquidity and borrowing constrained households, aligning with life-cycle models of consumption behavior. Insights inform planners by highlighting varied effects of inheritances on household consumption, particularly emphasizing the nuanced impact of inheritance size.

Suggested Citation

  • Belloc, Ignacio & Molina, José Alberto & Velilla, Jorge, 2025. "Consumption responses to inheritances: The role of durable goods," Journal of Macroeconomics, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:jmacro:v:83:y:2025:i:c:s0164070424000752
    DOI: 10.1016/j.jmacro.2024.103661
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    More about this item

    Keywords

    Household consumption; Inheritances; Wealth; PSID;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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