Journal of Economic Perspectives: Vol. 14 No. 2 (Spring 2000)


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Stock Market Wealth and Consumption

Article Citation

Poterba, JamesM. 2000. "Stock Market Wealth and Consumption." Journal of Economic Perspectives, 14(2): 99-118.

DOI: 10.1257/jep.14.2.99


This paper explores the link between changes in the aggregate value of corporate stock and changes in consumer spending. It presents data on the distribution of corporate stock ownership based on the 1998 Survey of Consumer Finances. It also uses time-series evidence on the comovement of stock market wealth and various categories of consumer spending to calibrate "the wealth effect." It concludes that in the year after a change in stock market values, consumer spending is likely to rise by between one and two cents for each dollar increase in the value of corporate stock.

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Poterba, James M. (MIT and NBER)

JEL Classifications

E21: Macroeconomics: Consumption; Saving; Wealth
E44: Financial Markets and the Macroeconomy
D31: Personal Income, Wealth, and Their Distributions


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