Heterogeneous wealth effects

We measure wealth effects on consumption using a novel research design: responses to direct survey questions asking how much a household would change consumption in response to unexpected (positive and negative) shocks to own home value. The average wealth effect is in the 2-5% range, in line with econometric estimates that associate changes in housing wealth with consumption realizations. However, our analysis uncovers significant heterogeneity. Extensive margin responses are limited: more than 90% of the sample reports no consumption adjustment to wealth shocks. On the other hand, conditioning on adjusting, intensive margin responses are substantial. Finally, the consumption response to positive wealth shocks is greater than the response to negative shocks, as suggested by the collateral channel mechanism of transmission between wealth shocks and consumption