Calendrier du 15 novembre 2016
Paris Trade Seminar
Du 15/11/2016 de 14:45 à 16:45
ScPo, 56, rue des Saints-Pères Salle : GOGUEL
ALBORNOZ F. (Nottingham)
*Importing after Exporting
écrit avec Ezequiel Garcia-Lembergman (UC-Berkeley)
Applied Economics Lunch Seminar
Du 15/11/2016 de 12:30 à 13:30
COMMAULT Jeanne (CREST)
How Does Consumption Respond to a Transitory Income Shock? Reconciling Natural Experiments and Structural Estimations
Results from natural experiments show that consumption responds strongly and significantly to a transitory variation in income such as a tax rebate or a lottery gain, while structural methods relying on theoretical restrictions to identify this response in survey data find that it is small and not statistically significant.
I account for this discrepancy by showing that structural estimation methods neglect the correlation between log-consumption growth and past shocks induced by precautionary behavior in the baseline model, and reinforced by borrowing constraints, habit persistence or illiquid wealth in more general frameworks.
This correlation undermines the validity of the restrictions used to identify the elasticity of consumption to a transitory shock and generates a downward bias. I develop a robust estimator that allows past shocks to affect log-consumption growth. The elasticity to a transitory shock becomes statistically significant and the results imply that, on average, 20% of a transitory gain in net income is consumed within the following year, which is comparable to the findings of the literature based on natural experiments.