Asymmetric Consumption Effects of Transitory Income Shocks
41 Pages Posted: 28 Mar 2017
There are 3 versions of this paper
Asymmetric Consumption Effects of Transitory Income Shocks
Asymmetric Consumption Effects of Transitory Income Shocks
Asymmetric Consumption Effects of Transitory Income Shocks
Date Written: March 24, 2017
Abstract
We use the responses of a representative sample of Dutch households to survey questions that ask how much they would consume of an unexpected, transitory, and positive income change, and by how much they would reduce their consumption in response to an unexpected, transitory, and negative income change. The questionnaire distinguishes between relatively small income changes (a one-month increase or drop in income), and relatively larger ones (equal to three months of income). The results are broadly in line with models of intertemporal choice with precautionary saving, borrowing constraints, and finite horizons.
Keywords: Transitory Income Shocks, Positive and Negative Income Shocks, Marginal Propensity to Consume
JEL Classification: D12, D14, E21
Suggested Citation: Suggested Citation
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