<p>This is the "wealth effect". It has been shown empirically that as one's assessment of their wealth increase, the more they spend. An important point to be made is that this may be disconnected from actual wealth. If you are counting on a big inheritance that may lead you to spend a higher % of your wealth now in expectation of the future payoff.</p>

<p>There's a good <a href="https://pdfs.semanticscholar.org/1a5e/0d67042512440a4d2c1035ae3ae3b076ffe8.pdf" rel="nofollow noreferrer">paper</a> that empirically looks at the correlation between wealth and spending but it's important to understand that the factors that influence an individual to spend money are numerous and it's virtually impossible to completely remove the signal from the noise.</p>

CC BY-SA 3.0
2018-02-27T18:33:03.173Z
2018-02-27T18:33:03.173Z
TheSaint321
<p>What is the estimated propensity to consume out of wealth, and how does it depend on income levels?</p>

<p>To make sure we are talking about the same thing: I am asking what estimates we have on what percentage of their wealth people turn into spending (on pure consumption - not investment) annually. And I want to know how it depends on income levels. Do poor people have a higher percentage than others, since otherwise they'd starve? Do middle income people have a higher or lower percentage than high income people? And how big is that difference, if it exists?</p>

CC BY-SA 3.0
2018-02-26T21:15:31.683Z
Do you have a specific country in mind? Different countries will potentially have different marginal propensity to consume.
Herr K.
CC BY-SA 3.0
2018-02-26T22:00:33.667Z
Age is an important factor - see the [life-cycle hypothesis](https://en.wikipedia.org/wiki/Life-cycle_hypothesis).
Adam Bailey
CC BY-SA 3.0
2018-02-27T20:02:21.063Z
How is this different this different than marginal propensity to consume?
EconJohn
CC BY-SA 3.0
2018-04-28T19:20:13.710Z
Declining marginal utility
nathanwww
<data-request><consumption>
What is the estimated propensity to consume out of wealth, and how does it depend on income levels?
Make
# What is the estimated propensity to consume out of wealth, and how does it depend on income levels?

(Asked by: username_0 on 2018-02-26)

What is the estimated propensity to consume out of wealth, and how does it depend on income levels?

To make sure we are talking about the same thing: I am asking what estimates we have on what percentage of their wealth people turn into spending (on pure consumption - not investment) annually. And I want to know how it depends on income levels. Do poor people have a higher percentage than others, since otherwise they'd starve? Do middle income people have a higher or lower percentage than high income people? And how big is that difference, if it exists?

**Tags:** data-request, consumption
> **Comments:**
> **username_1**: Do you have a specific country in mind? Different countries will potentially have different marginal propensity to consume.  
> **username_2**: Age is an important factor - see the [life-cycle hypothesis](https://en.wikipedia.org/wiki/Life-cycle_hypothesis).  
> **username_3**: How is this different this different than marginal propensity to consume?  
> **username_4**: Declining marginal utility  

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## 1 answers

### Answer by username_5 on 2018-02-27. Score: -1

This is the "wealth effect". It has been shown empirically that as one's assessment of their wealth increase, the more they spend. An important point to be made is that this may be disconnected from actual wealth. If you are counting on a big inheritance that may lead you to spend a higher % of your wealth now in expectation of the future payoff.

There's a good [paper](https://pdfs.semanticscholar.org/1a5e/0d67042512440a4d2c1035ae3ae3b076ffe8.pdf) that empirically looks at the correlation between wealth and spending but it's important to understand that the factors that influence an individual to spend money are numerous and it's virtually impossible to completely remove the signal from the noise.


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