IDEAS home Printed from https://ideas.repec.org/h/spr/prbchp/978-3-031-49105-4_39.html
   My bibliography  Save this book chapter

Heterogenous Consumption Responses and Wealth Inequality over the Business Cycle

In: Applied Economic Research and Trends

Author

Listed:
  • Rachel Forshaw

    (Heriot-Watt University)

Abstract

Recent research has highlighted the importance of heterogeneity in the marginal propensity to consume (MPC) out of transitory income shocks for the efficacy of monetary and fiscal policy. However, work on estimating the distribution of MPCs remains scant and typically assumes that an individual’s MPC remains constant over time. Using the US Panel Study of Income Dynamics (PSID), I calibrate a model of microeconomic wealth and discount rate heterogeneity with aggregate shocks over the Great Recession of 2008, a historical ‘upper bound’ in terms of the dynamics of the wealth distribution in recessionary times. Using a reduced-form model, I estimate the degree of heterogeneity in MPCs both over the population and over the business cycle and show that a state-invariant MPC distribution is irreconcilable with empirical changes in the wealth distribution.

Suggested Citation

  • Rachel Forshaw, 2024. "Heterogenous Consumption Responses and Wealth Inequality over the Business Cycle," Springer Proceedings in Business and Economics, in: Nicholas Tsounis & Aspasia Vlachvei (ed.), Applied Economic Research and Trends, chapter 0, pages 667-700, Springer.
    • Handle: RePEc:spr:prbchp:978-3-031-49105-4_39
    DOI: 10.1007/978-3-031-49105-4_39
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:prbchp:978-3-031-49105-4_39. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.