Did marginal propensities to consume change with the housing boom and bust?

B-Tier
Journal: Journal of Applied Econometrics
Year: 2024
Volume: 39
Issue: 1
Pages: 174-199

Score contribution per author:

0.670 = (α=2.01 / 3 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We extend a widely used semi‐structural model to identify and estimate dynamic consumption elasticities with respect to transitory income shocks. Applying our model to household survey data, we find a structural break in marginal propensities to consume following the end of the housing market boom, with the average across households increasing significantly. There is important heterogeneity by different household balance sheet characteristics, and the increase in the average appears to be driven by higher short‐run consumption elasticities for homeowners with low liquid wealth. The change in consumption behavior is consistent with tighter borrowing constraints more than a shift in wealth distributions.

Technical Details

RePEc Handle
repec:wly:japmet:v:39:y:2024:i:1:p:174-199
Journal Field
Econometrics
Author Count
3
Added to Database
2026-01-26