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Title: Heterogeneous Wealth Effects

Author(s): Dimitris Christelis, Dimitris Georgarakos, Tullio Jappelli, Luigi Pistaferri and Maarten Van Rooij

Publication Date: February 2020

Keyword(s): Heterogeneity, Housing and Wealth effect

Programme Area(s): Macroeconomics and Growth

Abstract: We measure wealth effects on consumption using a novel research design: responses to direct survey questions asking how much a household would change consumption in response to unexpected (positive and negative) shocks to own home value. The average wealth effect is in the 2-5% range, in line with econometric estimates that associate changes in housing wealth with consumption realizations. However, our analysis uncovers significant heterogeneity. Extensive margin responses are limited: more than 90% of the sample reports no consumption adjustment to wealth shocks. On the other hand, conditioning on adjusting, intensive margin responses are substantial. Finally, the consumption response to positive wealth shocks is greater than the response to negative shocks.

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Bibliographic Reference

Christelis, D, Georgarakos, D, Jappelli, T, Pistaferri, L and Van Rooij, M. 2020. 'Heterogeneous Wealth Effects'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14453