(Im‐)Patient Social Classes and Their Marginal Propensity to Consume Out of Wealth

ABSTRACT This paper provides estimates for marginal propensities to consume out of wealth for three social classes, renters, owners, and capitalists, in the euro area. This breakdown allows for a coherent analysis of heterogeneous consumption responses from households after a change in wealth, as households differ notably in their asset composition along the wealth distribution, both within and across countries. The results show that renters, which are primarily located at the lower end of the wealth distribution have an average marginal propensity to consume (MPC) out of wealth of around 15%–16%. Owners, located in the middle of the distribution have an average MPC out of wealth of around 3%–4% and capitalists, who are at the top of the wealth distribution have an estimate of around 1%. Further, a model wealth distribution from a buffer‐stock saving model with ex‐ante heterogeneity in preference parameters that match these estimates displays a similar degree of wealth inequality as the empirical wealth distribution in the euro area.