The Micro Anatomy of Macro Consumption Adjustments
American Economic Review
vol. 113,
no. 8, August 2023
(pp. 2201-31)
Abstract
We study crises characterized by large adjustments of aggregate consumption through their microlevel patterns. We document the cross-sectional patterns of consumption adjustment across the income distribution and find large adjustments for top-income households, who exhibit consumption-income elasticities similar to or larger than the average. We construct a heterogeneous-agent open economy model of consumption under income fluctuations and show that the data patterns are largely consistent with theories that attribute the dynamics of aggregate consumption to changes in aggregate permanent income. We also discuss our findings' implications for theories based on the tightening of households' borrowing constraints and analyze policy implications.Citation
Guntin, Rafael, Pablo Ottonello, and Diego J. Perez. 2023. "The Micro Anatomy of Macro Consumption Adjustments." American Economic Review, 113 (8): 2201-31. DOI: 10.1257/aer.20201931Additional Materials
JEL Classification
- D31 Personal Income, Wealth, and Their Distributions
- E21 Macroeconomics: Consumption; Saving; Wealth
- E32 Business Fluctuations; Cycles
- F33 International Monetary Arrangements and Institutions
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- O11 Macroeconomic Analyses of Economic Development
- O12 Microeconomic Analyses of Economic Development