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"To measure the wealth-consumption ratio, we estimate an exponentially affine model of the stochastic discount factor on bond yields and stock returns. We use that discount factor to compute the no-arbitrage price of a claim to aggregate US consumption. Our estimates indicate that total wealth is much safer than stock market wealth. The consumption risk premium is only 2.2 percent, substantially below the equity risk premium of 6.9 percent. As a result, our estimate of the wealth-consumption ratio is much higher than the price-dividend ratio on stocks throughout the post-war period. The high wealth-consumption ratio implies that the average US household has a lot of wealth, most of it human wealth. A variance decomposition of the wealth-consumption ratio shows less return predictability overall, but most of the return predictability is for future interest rates, not excess returns. We conclude that the properties of the total wealth portfolio are more similar to those of a long-maturity bond portfolio than those of a stock portfolio. The differences that we find between the risk-return characteristics of equity and total wealth suggest that equity is a special asset class"--National Bureau of Economic Research web site

AbstractWe revisit the evidence on the effect of changes in household wealth on consumption using a panel of Australian states. We find that a one per cent increase in the value of housing wealth increases consumption by about 0.16 per cent in the long‐run, with half of the response occurring within two quarters. The size of this response has been stable over time and largely reflects changes in spending on motor vehicles, durable goods and other discretionary items. We then run counterfactual scenarios using the Reserve Bank of Australia's macroeconometric model, MARTIN, to assess the macroeconomic effects of changes in household wealth. We show that increases in household wealth supported household spending between 2013 and 2017, when growth in disposable income was weak.

Abstract
This paper provides an explanation for situations in which the fundamental state variables describing the economy do not change, but aggregate consumption experiences significant changes. We present a theory of pseudo-wealth—individuals' perceived wealth that is derived from expectations of gains in bets arising from heterogeneous expectations. This wealth is divorced from society's real assets. The creation of a market for bets necessarily generates positive pseudo-wealth. Changes in the magnitude of differences of prior beliefs will lead to changes in expected wealth and hence to changes in consumption, implying instability in aggregate and individual consumption and ex post intertemporal consumption misallocations. Moreover, 'completing markets' through the creation of a new market for bets can increase individual and aggregate risk. With a utilitarian social welfare function, completing markets leads to lower welfare ex post, but the first theorem of welfare economics (evaluating each individual's well-being on the basis of her ex ante beliefs) still holds, raising unsettling questions for welfare analysis. We also show that if the planner uses beliefs that are consistent, then the betting equilibrium would be Pareto inferior.

Recent contributions to the journal have commendably sought to extend agro‐food studies from production to consumption in line with the consumption turn across the social sciences. In doing so, and inspired by actor‐network theory, exception has been taken to the systems of provision approach to food studies. This approach is defended by suggesting that it has in part been misinterpreted as comprising an extension of agro‐food studies to consumption rather than a general approach to consumption per se applied to food in particular. In addition, the later turn of such agro‐food studies to consumption is shown to continue to lag behind the understanding of the culture of consumption that has evolved over the past decade. A plea is made for more constructive and informed dialogue with the literature on consumption.

This paper derives the discrete‐time counterpart of Blanchard's overlapping generations model of consumer expenditure. The model is combined with two different models of liquidity‐constrained consumers; in the first the percentage of income accruing to such consumers is constant; in the second it is allowed to decrease over time. These models are estimated for five countries over the period 1967–92, and pass all standard specifications as well as some alternative non‐parametric tests.Our estimates suggest that in Canada and the USA the number of liquidity‐constrained consumers decreased substantially in the late 1970s and early 1980s. In Germany and the UK these changes occurred later and were less pronounced.

This note reviews recent Institute work on the factors that might affect the future evolution of consumption. Drawing on Barrell and Davis (2007), it discusses the evidence for the effects of housing wealth on consumption, and shows that there has been strong and well supported evidence for a link for some time. This evidence suggests that a fall in house prices will cause consumption growth to slow. The discussion also covers evidence from Barrell, Davis and Pomerantz (2006) on the effects of financial crises on consumption behaviour. They suggest that there are large and significant negative effects on consumption during banking crises that are over and above the effects on consumption of the crisis-induced changes in income and wealth. Much of this work is embedded in our structural model, NiGEM, and it is possible to estimate the effects of house price declines and financial crises on consumption and income using the model. The note also gives a set of ready reckoners for the impacts of house price declines on output and of a given associated fall in the level of housing wealth on the level of consumption.

Consumption behaviour in the UK is frequently seen as different from that in other countries. The relationship between the housing market and consumption is discussed at length in HM Treasury (2003). The housing market, which has been particularly cyclically volatile in the past 30 years, has contributed to cycles in consumption through its impact on housing wealth. Increased house prices increase the value of assets held, and impact on consumption, making the economy more cyclical. There is a clear relationship between the level of real financial plus housing net wealth as a proportion of income and the savings ratio (excluding adjustment for changes in net equity of households in pension funds), as can be seen from chart 1, where we plot the stock of total net assets over the flow of income to indicate just how much 'cover' the personal sector has on its current commitments. When wealth rises, for instance because real asset prices have risen, then individuals find themselves with more assets than they need and increase their consumption in order to return their assets to their equilibrium ratio to income. Clearly this process is not instantaneous, but cycles in wealth driven by house prices could have contributed to the cyclical nature of overall demand in the UK in the past 30 years.

"The book is the Europe volume in an international series on income, wealth, consumption, well-being and inequality. It focuses on the European Union (EU) and its member countries and other European countries that are in a close association with it. The book provides an overview of economic and social trends in the countries and in country groupings. It takes the long-term process of European integration as a starting point. It addresses policy areas pertaining to certain aspects of inequality and the European social model in thematic chapters. It makes a specific point to look at the European Union not as a conglomerate of individual countries but as an economic and political entity whose parts are closely interlinked politically and economically. It considers commonalities and differences in institutions and policies as they might impact the situation not just in one country but in the Union as a whole. The EU experience during the Great Recession and the Euro Crisis strongly show that developments in one country or a group of countries can harm not only well-being in an individual country but in the European Union more broadly. The chapters often take a novel approach in the analysis of social trends and policies and identify major policy challenges for EU and national policy makers."