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Estimating Marginal Propensities to Consume in Australia Using Micro Data

Author

Listed:
  • Laura Berger-Thomson

    (Reserve Bank of Australia)

  • Elaine Chung

    (Reserve Bank of Australia)

  • Rebecca McKibbin

    (Reserve Bank of Australia)

Abstract

This paper uses micro data from the Household, Income and Labour Dynamics in Australia Survey to estimate the marginal propensity to consume. Estimates are made by examining two types of policy changes – to income tax rates and lump-sum transfers – which help to identify the effect of shocks to income on consumption. A standard Euler equation for consumption is used to analyse the effect of income tax changes. The marginal propensity to consume out of lump-sum transfers is estimated using fixed effects and propensity score matching. In addition, the paper examines differences in the marginal propensity to consume across households according to measures of liquidity constraints and unemployment risks.

Suggested Citation

  • Laura Berger-Thomson & Elaine Chung & Rebecca McKibbin, 2009. "Estimating Marginal Propensities to Consume in Australia Using Micro Data," RBA Research Discussion Papers rdp2009-07, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2009-07
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    References listed on IDEAS

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    9. Souleles, Nicholas S., 2002. "Consumer response to the Reagan tax cuts," Journal of Public Economics, Elsevier, vol. 85(1), pages 99-120, July.
    10. Gianni La Cava & John Simon, 2003. "A Tale of Two Surveys: Household Debt and Financial Constraints in Australia," RBA Research Discussion Papers rdp2003-08, Reserve Bank of Australia.
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    Citations

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    Cited by:

    1. Neri, Andrea & Rondinelli, Concetta & Scoccianti, Filippo, 2017. "Household spending out of a tax rebate: Italian “€80 tax bonus”," Working Paper Series 2099, European Central Bank.
    2. Jonathan Kearns & Mike Major & David Norman, 2021. "How Risky Is Australian Household Debt?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(3), pages 313-330, September.
    3. Christian Schoder, 2017. "An estimated Dynamic Stochastic Disequilibrium model of Euro-Area unemployment," Working Papers 1725, New School for Social Research, Department of Economics.
    4. Finlay Richard & Price Fiona, 2015. "Household saving in Australia," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 677-704, July.
    5. repec:zbw:bofitp:2011_007 is not listed on IDEAS
    6. Windsor, Callan & La Cava, Gianni & Hansen, James, 2015. "Home price beliefs: Evidence from Australia," Journal of Housing Economics, Elsevier, vol. 29(C), pages 41-58.
    7. Savoia, Ettore, 2023. "The effects of labor income risk heterogeneity on the marginal propensity to consume," Working Paper Series 2866, European Central Bank.
    8. Petr Jakubík, 2011. "Household Balance Sheets and Economic Crisis," Working Papers IES 2011/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2011.
    9. Alexander Ballantyne & Tom Cusbert & Richard Evans & Rochelle Guttmann & Jonathan Hambur & Adam Hamilton & Elizabeth Kendall & Rachael McCririck & Gabriela Nodari & Daniel M. Rees, 2020. "MARTIN Has Its Place: A Macroeconometric Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 96(314), pages 225-251, September.
    10. Federica Teppa, 2014. "Consumption behaviour and financial crisis in the Netherlands," DNB Working Papers 453, Netherlands Central Bank, Research Department.
    11. Andrea Neri & Concetta Rondinelli & Filippo Scoccianti, 2017. "Household spending out of a tax rebate: Italian ��80 tax bonus�," Questioni di Economia e Finanza (Occasional Papers) 379, Bank of Italy, Economic Research and International Relations Area.
    12. Jakubik, Petr, 2011. "Households response to economic crisis," BOFIT Discussion Papers 7/2011, Bank of Finland, Institute for Economies in Transition.
    13. Kim, Daehwan & Nilsen, Jeffrey, 2021. "Testing the presence of borrowing constraints from consumption responses to housing deposit changes," Journal of Asian Economics, Elsevier, vol. 74(C).
    14. Callan Windsor & Gianni La Cava & James Hansen, 2014. "Home Price Beliefs in Australia," RBA Research Discussion Papers rdp2014-04, Reserve Bank of Australia.
    15. Richard Finlay & Fiona Price, 2014. "The Rise in Household Saving," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 1-10, June.
    16. Jakubik, Petr, 2011. "Households response to economic crisis," BOFIT Discussion Papers 7/2011, Bank of Finland Institute for Emerging Economies (BOFIT).

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    More about this item

    Keywords

    marginal propensity to consume; panel data; HILDA;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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