Wealth shocks, unemployment shocks and consumption in the wake of the Great Recession

We use data from the 2009 Internet Survey of the Health and Retirement Study to examine the consumption impact of wealth shocks and unemployment during the Great Recession in the US. We find that many households experien
We use data from the 2009 Internet Survey of the Health and Retirement Study to examine the consumption impact of wealth shocks and unemployment during the Great Recession in the US. We find that many households experienced large capital losses in housing and in their financial portfolios, and that a non-trivial fraction of respondents have lost their job. As a consequence of these shocks, many households reduced substantially their expenditures. We estimate that the marginal propensities to consume with respect to housing and financial wealth are 1 and 3.3 percentage points, respectively. In addition, those who became unemployed reduced spending by 10 percent. We also distinguish the effect of perceived transitory and permanent wealth shocks, splitting the sample between households who think that the stock market is likely to recover in a year’s time, and those who don’t. In line with the predictions of standard models of intertemporal choice, we find that the latter group adjusted much more than the former its spending in response to financial wealth shocks.
show moreshow less

Download full text files

Export metadata

  • Export Bibtex
  • Export RIS

Additional Services

    Share in Twitter Search Google Scholar
Metadaten
Author:Dimitris Christelis, Dimitris Georgarakos, Tullio Jappelli
URN:urn:nbn:de:hebis:30:3-241104
Series (Serial Number):CFS working paper series (2011, 27)
Publisher:Goethe-Univ., House of Finance, Center for Financial Studies
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Date of Publication (online):2012/02/07
Date of first Publication:2011/10/19
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2012/02/07
Tag:Marginal Propensity to Consume ; Unemployment; Wealth Shocks
Pagenumber:40
HeBIS PPN:312194390
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Sondersammelgebiets-Volltexte
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

$Rev: 11761 $