Liquidity Constraints, the Extended Family, and Consumption

31 Pages Posted: 24 Jun 2015

See all articles by HwaJung Choi

HwaJung Choi

University of Michigan

Kathleen M. McGarry

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Robert F. Schoeni

University of Michigan at Ann Arbor - Survey Research Center

Date Written: May 2015

Abstract

This study examines whether the extended family influences consumption. Extending prior tests on food consumption to total consumption, little to no evidence is found in support of altruism among related households and or that fluctuations in dynastic income affects one’s own consumption. However, the effect of transitory fluctuations in own income on consumption are contingent on own wealth and the wealth of the extended family, with estimates of the marginal propensity to consume roughly three times higher for individuals whose own and extended family wealth is low versus individuals whose own and extended family wealth is high.

Keywords: consumption, liquidity constraints, altruism, family wealth

Suggested Citation

Choi, HwaJung and McGarry, Kathleen M. and Schoeni, Robert F., Liquidity Constraints, the Extended Family, and Consumption (May 2015). Michigan Retirement Research Center Research Paper No. WP 2015-320. Available at SSRN: https://ssrn.com/abstract=2621552 or http://dx.doi.org/10.2139/ssrn.2621552

HwaJung Choi (Contact Author)

University of Michigan ( email )

2800 Plymouth Rd.
Ann Arbor, MI 48109
United States

Kathleen M. McGarry

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
405 Hilgard Avenue
Los Angeles, CA 90095-1477
United States
310-206-2833 (Phone)
310-825-9528 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert F. Schoeni

University of Michigan at Ann Arbor - Survey Research Center ( email )

Ann Arbor, MI 48106-1248
United States

HOME PAGE: http://www-personal.umich.edu/~bschoeni/

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