American Economic Journal: Macroeconomics
no. 2, April 2023
This paper estimates how overall consumer spending responds to changes in gasoline prices. It uses the differential impact across consumers of the sharp drop in gasoline prices in 2014 for identification. This estimation strategy is implemented using comprehensive, high-frequency, transaction-level data for a large panel of individuals. The average estimated marginal propensity to consume (MPC) out of unanticipated, permanent shocks to income is approximately one. This estimate accounts for the elasticity of demand for gasoline and potential slow adjustment to changes in prices. The high MPC implies that changes in gasoline prices have large aggregate effects.
Gelman, Michael, Yuriy Gorodnichenko, Shachar Kariv, Dmitri Koustas, Matthew D. Shapiro, Dan Silverman, and Steven Tadelis.
"The Response of Consumer Spending to Changes in Gasoline Prices."
American Economic Journal: Macroeconomics,
Consumer Economics: Empirical Analysis
Household Finance: Household Saving, Borrowing, Debt, and Wealth
Production, Pricing, and Market Structure; Size Distribution of Firms
Mining, Extraction, and Refining: Hydrocarbon Fuels
Retail and Wholesale Trade; e-Commerce