Trickle-down Consumption
نویسندگان
چکیده
Using state-level variation over time in the top deciles of the income distribution, we observe that nonrich households consume a larger share of their current income when exposed to higher top income levels. We argue that permanent income, wealth effects, or upward local price pressures cannot be the sole explanation for this finding. Instead, we show that the budget shares non-rich households allocate to more visible and more income elastic goods and services rise with top income levels, consistent with status-maintaining and supply-driven-demand explanations for our primary finding. Non-rich households exposed to higher top income levels self-report more financial duress; moreover, higher top income levels in a state are correlated with more personal bankruptcy filings. Non-rich households might have saved up to 3 percent more annually by the mid-2000s had incomes at the top grown at the same rate as median income since the early 1980s. * We thank Chris Carroll, Ulrike Malmendier, and Jonathan Parker for helpful comments. We also would like to thank seminar participants at the AEA, NBER Economics of Household Savings, Chicago Booth, Harvard University, Harvard Business School, Princeton University, EIEF, University of California at Berkeley-Haas, Northwestern-Kellogg, NBER Monetary Economics, NBER Income Distribution and Macroeconomy, INSEAD, and UC Davis Household Finance Conference for helpful comments.
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