Housing Wealth Effects: Cross‐sectional Evidence from New Vehicle Registrations

We investigate the relationship between housing wealth and consumption using postcode‐level variation in house prices and administrative data on new passenger vehicle registrations as a proxy for consumption. We find a robust cross‐sectional relationship, and in our preferred specification estimate an elasticity of new passenger vehicle registrations with respect to gross housing wealth of 0.4–0.5, which based on our preferred calibration implies a marginal propensity to consume for total consumption of less than 0.5 cents. Notably, we find evidence that the relationship between house prices and new vehicle registrations is heterogeneous in income.     

How important are wealth effects on consumption in Canada?

We estimate the marginal propensity to consume from financial and housing wealth in Canada. The modelling framework of Carroll et al. (2011) that builds on the observed stickiness in consumption data is used. Estimations and inferences are conducted using identification‐robust methods. The results provide support for the overall modelling strategy, but there are also important differences in the identification status of the econometric equations considered. Based on the most informative specification, we find that both types of wealth—financial and housing—have significant effects in Canada and that the former has a greater effect than the latter. A simple extension of the model that also accounts for non‐price credit conditions shows that housing wealth may be relevant only during periods of easier access to credit. Finally, we find support for relatively high stickiness in consumption growth in Canada.     

Estimating the household consumption function in Saudi Arabia: an error correction approach

ABSTRACT

We estimate a micro-founded life-cycle consumption model for Saudi Arabia over the period 1970–2017 using error correction model procedures. Dynamic adjustments are significant, and both income and wealth are found to have significant effects, with a long-run marginal propensity to consume out of the income of 0.95 and out of the wealth of 0.06. The sensitivity of consumption to income and wealth, as well as the estimated short-term effects of price and real interest rate, are consistent with the rapidly growing Saudi economy. By capturing the key determinants of the life-cycle model, our approach is useful for the design of macroeconomic policy. We estimate the impact of the recent VAT reform.     

Consumer durables and the marginal propensity to consume out of permanent income shocks

This paper derives and estimates a model in which the utility of durable and non-durable consumption is allowed to be non-separable and individuals face a convex adjustment cost for the purchase of a new durable good. Panel data on subjective expectations allow us to identify income shocks and estimate the marginal propensity to consume out of permanent income shocks.     

Consumption and disposable income in the EU countries: the role of wealth effects

We investigate the long run relationship between private consumption and disposable income for a sample of EU countries using recently developed panel cointegration techniques. For the ordinary consumption-income model the evidence on cointegration is ambiguous. In addition, the cointegration vector obtained by efficient estimation methods is not consistent with theoretical reasoning, as it reflects a decline in the savings rate over time. Extending the analysis by financial wealth improves the model fit markedly. In particular, the income elasticity is not different from 1 and therefore in line with the life cycle permanent income hypothesis. The marginal propensity to consume out of financial wealth is in a range of 3–5%, thereby confirming recent time series results.     

Back to Basics: Remittances in the Keynesian Macroeconomic Framework

This paper examines a remittance multiplier based on the short-run Keynesian equilibrium approach and shows how income may be affected by remittance inflows. We explore this through the equilibrium in the goods and money markets, where remittances can affect both consumption and the demand for real money balances. We present this simple theoretical model utilizing a standard Keynesian framework. The short-run Keynesian equilibrium approach provides insight into how remittances affect output and income, and its potential multiplier effects. The model used is indicative of a positive relationship between the marginal propensity to consume out of remittances and the multiplier. The framework also shows that remittances will have a greater impact if its marginal propensity to consume is greater than that for standard disposable income.     

Estimating the marginal propensity to consume using the distributions of income,consumption, and wealth

Studies of economic inequality almost always separately examine income, consumption, and wealth inequality, and hence, miss the important synergy amongst the three measures explicit in the life-cycle budget constraint. These joint distributions, however, are important in evaluating macroeconomic impacts of changes in income because the response may differ across the wealth distribution. This heterogeneity in the response to income changes can have significant impact on the effectiveness of government fiscal policy. Using the Panel Study of Income Dynamics from 1999–2013, we examine how the marginal propensity to consume (MPC) differs across the wealth distribution. We find that the MPC is lower at higher wealth quintiles, indicating that low wealth households cannot smooth consumption as much as other households. This implies that increasing wealth inequality likely reduces aggregate consumption, which, in turn, could limit economic growth.     

持久性收入对中国农民消费影响分析

运用弗里德曼的持久性收入假说分析我国农民的消费问题,并利用计量经济学的方法对中国历年农民消费统计数据进行分析,得出“持久性收入及持久性收入的边际消费倾向对我国现阶段农民消费支出影响较大”的结论,并从增加持久性收入和提高持久性收入的边际消费倾向两个方面就增加农民消费提出政策建议。     

Weintraub's consumption coefficient: some economic implications and evidence for the UK

Weintraub's consumption coefficient, the ratio of total consumerexpenditure to income from employment, helps to elucidate trendsin the sectoral and functional distributions of income. It simplifiesand adds precision to Kaleckian macroeconomics by showing howdistributions of income affect the level of economic activity.Empirical estimates of the coefficient are presented for theUK from 1972 to 1995. From 1975 onwards, the coefficient hasindicated a marked redistribution of income in favour of capitalist(non-employment) income, accompanied by a significant rise inthe average propensity to consume from capitalist (non-employmentincome). Wealth effects induced by the housing boom of the 1980shave enabled capitalists' income and consumption to continueto increase after 1989 despite a fall in investment.     

持久收入假说与我国城镇居民消费——基于省级面板数据的实证分析

运用基于持久收入和暂时收入的两种分解方法的省际面板模型检验持久收入假说的三个假设.结果发现,我国城镇居民消费与持久收入和暂时收入均存在显著的相关关系,暂时收入的边际消费倾向不为零;就诸省份而言,暂时收入的边际消费倾向不同.进一步探讨了持久收入假说不能完全解释我国城镇居民消费行为的原因."λ假说"检验表明,城镇居民消费对当期收入过度敏感,其呈现理性化趋势.     

A reexamination of the consumption function using frequency domain regressions

This paper reexamines the permanent income hypothesis (PIH) in the frequency domain. In contrast to some time domain tests, our frequency domain approach provides an explicit and natural test ofboth the permanentand transitory implications of the PIH for jointly nonstationary consumption and income data. Using a simple theoretical model, we demonstrate that the PIH implies the marginal propensity to consume (MPC) out of zero frequency income is unity. The PIHalso implies that the theoretical MPC out of transitory (or high frequency) income is smaller than the long-run MPC. These theoretical restrictions are natural implications of Friedman's hypothesis that agents consume out of permanent or low frequency income and (dis)save out of transitory or high frequency income. We test this full set of restrictions directly using spectral regression techniques. Under our set of assumptions, the derived disposable income process is shown to have a unit root and to be cointegrated with consumption. We therefore employ a systems spectral regression procedure that accommodates stochastic trends in the consumption and income series as well as the joint dependence in these series. In view of the relatively recent development of these systems spectral estimators, we also conduct Monte Carlo simulations across both low and high frequencies to assess properties of the estimator relative to established single equation techniques. New empirical estimates of the consumption function and tests of the PIH based on systems spectral regression methods are reported for U.S. aggregate consumption and income data over the period 1948–1993. The empirical results provide some evidence for the theoretical implications of the PIH.     

Malnutrition in the shadow of economic growth

We formulate the consumption and wealth accumulation behavior for low‐income agents who are concerned with their relative income with respect to a reference group. Using a dynamic consumption and saving model, we show the conditions under which low‐income and status‐seeking individuals accumulate more wealth and consume less of a nutritious good than the levels in the absence of status‐seeking behavior. Our results suggest that malnutrition and economic growth may go hand in hand in developing economies.     

Intertemporal propensity to consume

Cross-sectionally estimated Engel curves tend to exhibit shapes that imply ultimately decreasing marginal propensities to consume as income rises. This suggests at first sight a tendency to slow down in private consumption. This tendency has to be reconsidered taking into account the fact that Engel curves usually shift significantly over time. We introduce the notion of “intertemporal propensity to consume” to shed more light on the drivers and patterns of the evolution of Engel curves. Using this notion, we are able to identify and measure the direction of the expansion path of consumption as time goes by, while controlling for household characteristics and price levels. Using German household data, we show that, over time, the intertemporal propensity to consume systematically offsets the consumption paths implied by the marginal propensity to consume that is derived cross-sectionally at one point in time. We claim that this difference between marginal and intertemporal propensity to consume should be ascribed to variations in the socioeconomic structures that occur over time and that may be linked both to the supply side (innovation and technical change) and the demand side (learning dynamics of consumers). We also show that changes in relative prices play a minor role in the evolution of Engel curves.     

Optimal Dynamic Taxation with Distinctive Forms of Social Status Attainment

We examine the role of both consumption‐ and wealth‐induced social comparisons in setting dynamic optimal income taxation. Under complete information, state‐invariant labor income taxes are used to remedy the externality caused by consumption‐induced social comparisons, while state‐contingent capital income taxes are used to remedy the externalities caused by both consumption‐ and wealth‐induced social comparisons. Under incomplete information, distinct types of agents are subject to an identical marginal capital income tax, which removes social comparisons. To solve the information problem, low‐productivity agents could be subject to a lower marginal labor tax than high‐productivity agents, which contradicts the traditional result in the Mirrlees–Stiglitz models.     

Specification and Estimation of ELES

The Extended Linear Expenditure System b reformulated to yield private per capita net worth as the basic explanatory variable. As a by-product the model implies that the marginal propensity to consume/save out of permanent income varies with the rate of interest. In the estimation, account is taken of inconsistencies in data compiled from different sources by explicity including the savings relationship in the system. Parameter estimates based on Australian data are presented.     

A comparison of two methods for estimating income uncertainty with an application to aggregate consumption behaviour

Econometric theory now provides various techiniques for estimating the variance of a variable for which only a single. Observation is available at each sample point. This paper compares the autoregressive conditional heteroskedastic (ARCH) and linear moment (LM) estimated of the variance of disposable labour income as measures of income uncertainty. Consumer theory postulates a negative relationship between uncertainty about future income and current consumption. Using quarterly post-world war II data with income modelled as a random walk with drift, both ARCH and LM estimates of the variance of income are included in a standard specification of the consumption function. It is found that while noth the ARCH and LM estimates of income uncertainty provide essentially the same predicted reduction in consumption growth as uncertainty increases the LM estimates yield a statistically significant influence on consumption while the ARCH estimated do not. However, both uncertainty measures provide a statistically significant imporvement in the specification of the consumption function relative to estimating the equation in the absence on an uncertainty measure. Thus, recent advances in estimation techniques, for post-world waf II data, show that the uncertainty theorists of over two decades ago were correct, that is estimation of a consumption function in the absence of an uncertainty measure relults in an equation with a biased estimate of the marginal propensity to consume as well as biased estimates of coefficients for all other included variables (see e.g. Leland, 1968, PP. 470-472).     

中国居民收入差距对消费倾向变动趋势的影响

本文以消费的边际效用递减规律为基础,探讨了居民收入差距和消费倾向间可能的关系,并对中国居民消费倾向变动趋势进行解释.本文分析表明,收入差距对消费倾向可能的影响和经济发展水平有关系,当经济发展到一定程度时,居民收入差距在一定的范围内变化不会影响消费倾向的变化,但超过一定范围后,随着收入差距变大,消费倾向变低.我们认为过大的居民收入差距是造成近年来消费倾向变低的重要原因.     

湖南农村居民消费结构分析

本文首先利用恩格尔系数和消费支出构成对湖南农村居民消费现状进行了分析,结果表明湖南农村居民目前还处于温饱阶段,不过已逐渐开始向小康阶段过渡;然后借助1995—2007年《中国统计年鉴》和《湖南统计年鉴》中的湖南农村居民人均纯收入,以及食品、衣着、居住、家庭设备用品及服务、交通通信、教育文化娱乐服务、医疗保健以及杂项商品与服务八类人均全年消费支出数据,建立了扩展的消费支出系统(ELES模型),并利用该模型对湖南农村居民年均基本消费支出水平、边际消费倾向和需求收入弹性进行分析。结果表明,湖南农村居民消费结构正处于从生存型向发展型和享受型过渡的阶段。     

The Marginal Propensity to Earn and Consume out of Unearned Income: Evidence Using an Unusually Large Cash Grant Reform*

In this paper, we use the rapid introduction of an unconditional cash grant (child support) in South Africa to estimate the marginal propensity to consume and earn out of unearned income. We find that the marginal propensity to earn is about ?0.3 and that the marginal propensity to consume is about 0.7. Nothing of the grant appears to be saved; if anything, households dissave against future grant payments. The marginal propensities estimated here are similar to those reported in comparable papers using US data. However, they stand in contrast to some results on conditional cash transfers in other developing countries.     

The permanent income hypothesis in an underdeveloped economy

After a concise but critical survey of several tests of the permanent income hypothesis (PIH), the authors advance their own test for India using annual data from 1919–1960. It employs Friedman's technique for calculating the permanent value of a variable. Two different specifications of the model are tested, using different values of the consumer's ‘horizon.’ In almost all cases it is found that the marginal propensity to consume out of transitory income is very similar to the marginal propensity to consume out of permanent income. The authors conclude that even a looser variant of the PIH is not valid for India. However, no valid generalization with respect to the appropriate planning horizon can be made, for the PIH was almost equally invalid with a horizon of one, two and two-and-a-half years. The authors briefly discuss the policy implications of their results for the savings efforts in underdeveloped countries.