Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154081
Authors: 
Carroll, Christopher D.
Slacalek, Jiri
Tokuoka, Kiichi
Year of Publication: 
2014
Series/Report no.: 
ECB Working Paper 1648
Abstract: 
Using new micro data on household wealth from fifteen European countries, the Household Finance and Consumption Survey, we first document the substantial cross-country variation in how various measures of wealth are distributed across individual households. Through the lens of a standard, realistically calibrated model of buffer-stock saving with transitory and permanent income shocks we then study how cross-country differences in the wealth distribution and household income dynamics affect the marginal propensity to consume out of transitory shocks (MPC). We find that the aggregate consumption response ranges between 0.1 and 0.4 and is stronger (i) in economies with large wealth inequality, where a larger proportion of households has little wealth, (ii) under larger transitory income shocks and (iii) when we consider households only using liquid assets (rather than net wealth) to smooth consumption.
Subjects: 
consumption dynamics
cross-country comparisons
liquid assets
MPC
wealth inequality
JEL: 
D12
D31
D91
E21
Document Type: 
Working Paper

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