American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Consumption Heterogeneity: Micro Drivers and Macro Implications
American Economic Journal: Macroeconomics
vol. 15,
no. 1, January 2023
(pp. 314–41)
Abstract
We document heterogeneity in the marginal propensity to consume (MPC) across household characteristics relevant to understanding heterogeneous agent models and monetary policy transmission. We find a strong negative relationship between household liquid wealth and MPC. We show that household liquid wealth predicts MPC closely for every other household characteristic we look at. We use a new empirical method that overcomes sources of bias found in the existing literature, along with administrative data from Denmark that allow us to identify heterogeneous behavior. We use our results to analyze monetary policy transmission mechanisms in both Denmark and the United States.Citation
Crawley, Edmund, and Andreas Kuchler. 2023. "Consumption Heterogeneity: Micro Drivers and Macro Implications." American Economic Journal: Macroeconomics 15 (1): 314–41. DOI: 10.1257/mac.20200352Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D31 Personal Income, Wealth, and Their Distributions
- E21 Macroeconomics: Consumption; Saving; Wealth
- E43 Interest Rates: Determination, Term Structure, and Effects
- E52 Monetary Policy
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth