Consumption Network Effects

59 Pages Posted: 13 Jun 2016

See all articles by Giacomo De Giorgi

Giacomo De Giorgi

University College London; NBER; Federal Reserve Banks - Federal Reserve Bank of New York

Anders Frederiksen

IZA Institute of Labor Economics

Luigi Pistaferri

Stanford University; Centre for Economic Policy Research (CEPR)

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Abstract

In this paper we study the relevance and mechanics of consumption network effects. We use long panel data on the entire Danish population to construct a measure of consumption based on administrative tax records, and define the peer groups in terms of workplace, occupation, education, and age. We then apply an IV strategy, and fixed effect models, to recover the effects. Our instruments arise naturally from the network structure and firms shocks. The estimated effects are statistically significant and relevant for policies as they generate non-negligible multiplier effects. Further, the results are consistent with a "Keeping-up" model.

Keywords: consumption, networks, social multiplier, risk sharing

JEL Classification: E21, D12, D85

Suggested Citation

De Giorgi, Giacomo and Frederiksen, Anders and Pistaferri, Luigi, Consumption Network Effects. IZA Discussion Paper No. 9983. Available at SSRN: https://ssrn.com/abstract=2794293

Giacomo De Giorgi (Contact Author)

University College London ( email )

Gower Street
London
United Kingdom

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Anders Frederiksen

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Luigi Pistaferri

Stanford University ( email )

Stanford, CA 94305
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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