Wealth, Composition, Housing, Income and Consumption
40 Pages Posted: 18 Jan 2014 Last revised: 19 Jan 2014
Date Written: January 16, 2014
The present research covering the latest residential boom and bust cycle highlights the lack of uniform or constant time invariant wealth, housing and income relations. More important, wealth composition is shown to be a significant determinant of consumption. The marginal effects of housing equity, financial wealth and income differ substantially based on the composition of household wealth. Households with the highest percentage of net worth in financial assets have much lower income effects, have substantially higher marginal effects associated with stock holdings and have housing equity effects that differ noticeably from other households. Income effects for groups with the smallest amounts of relative financial wealth are dramatically higher than for households with greater financial wealth. Wealth and its composition affect consumption.
Keywords: Consumption; Income; Wealth composition; Wealth effect; Housing effect
JEL Classification: G10, G11, G12, G14, E31
Suggested Citation: Suggested Citation