Does Inequality Matter for the Consumption-Wealth Channel? Empirical Evidence

54 Pages Posted: 25 Oct 2017

See all articles by Luc Arrondel

Luc Arrondel

Paris School of Economics (PSE)

Pierre Lamarche

European Union - Eurostat

Frederique Savignac

University Paris-Est Créteil (UPEC)

Date Written: October 16, 2017

Abstract

This paper studies the heterogeneity of the marginal propensity to consume out of wealth based on French household surveys. This heterogeneity is driven by differences in both wealth composition and wealth levels. We find a decreasing marginal propensity to consume out of wealth across the wealth distribution for all net wealth components. The marginal propensity to consume out of financial assets tends to be higher compared with the effect of housing assets, except at the top of the wealth distribution. The marginal propensity to consume out of housing wealth increases with debt pressure and depends on debt composition. Based on a simulation exercise, we find a limited effect of wealth shocks on consumption inequality. An increase in stock prices tends however to slightly increase consumption inequality, especially at the top of the distribution.

Keywords: consumption, marginal propensity to consume out of wealth, policy distributive effects, household survey

JEL Classification: D120, E210, C210

Suggested Citation

Arrondel, Luc and Lamarche, Pierre and Savignac, Frederique, Does Inequality Matter for the Consumption-Wealth Channel? Empirical Evidence (October 16, 2017). CESifo Working Paper Series No. 6676. Available at SSRN: https://ssrn.com/abstract=3058563

Luc Arrondel

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Pierre Lamarche

European Union - Eurostat ( email )

Luxembourg, L-2920
Luxembourg

Frederique Savignac (Contact Author)

University Paris-Est Créteil (UPEC) ( email )

61 avenue du General de Gaulle
Creteil cedex, 94010
France

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