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Wealth effect on consumption during the sovereign debt crisis: households heterogeneity in the euro area

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  • Garbinti, Bertrand
  • Lamarche, Pierre
  • Savignac, Frédérique
  • Lecanu, Charlélie

Abstract

This paper studies the heterogeneity of the marginal propensity to consume out of wealth (MPC) both across and within countries. We estimate the MPC based on a cross-country harmonized household level dataset which combines surveys on wealth, income and consumption. We use panel regressions and an instrumental variable approach. First, our panel-based MPC estimates are very similar to those obtained on aggregate data and show substantial heterogeneity across countries. The wealth effect is coming both from housing and financial assets, while the main asset channel varies between countries. Second, the MPC is higher for low-wealth households, whatever the country. Third, we find some asymmetries across countries regarding the reaction to losses versus gains. Fourth, higher MPC is obtained for the two main consumption expenditure categories. Fifth, we find evidences that housing prices shock decreases consumption inequality while financial wealth shocks have a limited effect on consumption inequality. JEL Classification: D12, E21, C21

Suggested Citation

  • Garbinti, Bertrand & Lamarche, Pierre & Savignac, Frédérique & Lecanu, Charlélie, 2020. "Wealth effect on consumption during the sovereign debt crisis: households heterogeneity in the euro area," Working Paper Series 2357, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20202357
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    Cited by:

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    3. Jo�o Rebelo & Ra�l Comp�s & Samuel Faria & T�nia Gon�alves & Vicente Pinilla & Katrin Sim�n-Elorz, 2021. "Wine consumption frequency during lockdown in the Iberian markets," Documentos de Trabajo dt2021-02, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    4. Rebelo, João & Compés, Raúl & Faria, Samuel & Gonçalves, Tânia & Pinilla, Vicente & Simón-Elorz, Katrin, 2021. "Covid-19 Lockdown and Wine Consumption Frequency in Portugal and Spain," Working Papers 321853, American Association of Wine Economists.
    5. Slacalek, Jiri & Tristani, Oreste & Violante, Giovanni L., 2020. "Household balance sheet channels of monetary policy: A back of the envelope calculation for the euro area," Journal of Economic Dynamics and Control, Elsevier, vol. 115(C).
    6. Ansgar Rannenberg & Thomas Theobald, 2022. "Income inequality and the German export surplus," Working Paper Research 424, National Bank of Belgium.

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    More about this item

    Keywords

    consumption; household surveys; 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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