Asymmetric Consumption Effects of Transitory Income Shocks

Christelis, Dimitris; Georgarakos, Dimitris; Jappelli, Tullio; Pistaferri, Luigi; <!>van Rooij, Maarten

doi:10.2139/ssrn.2942102

Asymmetric Consumption Effects of Transitory Income Shocks

De Nederlandsche Bank Working Paper No. 551

41 Pages Posted: 28 Mar 2017

See all articles by Dimitris Christelis

Dimitris Christelis

Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II; Center for Financial Studies (CFS); ARC Centre of Excellence in Population Ageing Research (CEPAR); Netspar

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research; Center for Financial Studies (CFS)

University of Naples Federico II - Department of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Center for Studies in Economics and Finance - CSEF

Luigi Pistaferri

Stanford University; Centre for Economic Policy Research (CEPR)

Maarten van Rooij

De Nederlandsche Bank; Netspar

There are 3 versions of this paper

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

Christelis, Dimitris and Georgarakos, Dimitris and Jappelli, Tullio and Pistaferri, Luigi and van Rooij, Maarten, Asymmetric Consumption Effects of Transitory Income Shocks (March 24, 2017). De Nederlandsche Bank Working Paper No. 551. Available at SSRN: https://ssrn.com/abstract=2942102 or http://dx.doi.org/10.2139/ssrn.2942102