The Wealthy Hand-to-Mouth

71 Pages Posted: 28 Apr 2014

See all articles by Greg Kaplan

Greg Kaplan

Princeton University - Department of Economics

Giovanni L. Violante

New York University, Department of Economics; Centre for Economic Policy Research (CEPR)

Justin Weidner

Princeton University

Date Written: April 2014

Abstract

The wealthy hand-to-mouth are households who hold little or no liquid wealth (cash, checking, and savings accounts), despite owning sizable amounts of illiquid assets (assets that carry a transaction cost, such as housing or retirement accounts). We use survey data on household portfolios for the U.S., Canada, Australia, the U.K., Germany, France, Italy, and Spain to document the share of such households across countries, their demographic characteristics, the composition of their balance sheets, and the persistence of hand-to-mouth status over the life cycle. The portfolio configuration of the wealthy hand-to-mouth suggests that these households may have a high marginal propensity to consume out of transitory income changes, a prediction for which we find empirical support in PSID data. We explain the implications of this group of consumers for macroeconomic modeling and fiscal policy analysis.

Suggested Citation

Kaplan, Greg and Violante, Giovanni L. and Weidner, Justin, The Wealthy Hand-to-Mouth (April 2014). NBER Working Paper No. w20073. Available at SSRN: https://ssrn.com/abstract=2430068

Greg Kaplan (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Giovanni L. Violante

New York University, Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-992-9771 (Phone)
212-995-4186 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Justin Weidner

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

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