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Explore the latest working papers and publications from our community of scholars. Here, you will find cutting-edge empirical research on socioeconomic disparities, barriers to social mobility, and the strategies to ameliorate inequality.

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Wealth, Race, and Consumption Smoothing of Typical Income Shocks

Working Paper

July 01, 2020

AuthorsPeter Ganong, Damon Jones, Pascal J. Noel, Fiona E. Greig, Diana Farrell, Chris Wheat

We estimated the elasticity of consumption with respect to typical labor income shocks using firm-wide changes in monthly pay, and analyzed how this elasticity varies by wealth and race, using administrative bank account data.

We sought to understand the consumption responses to typical income fluctuations and explore how wealth and racial disparities affect consumption smoothing, addressing an open question about heterogeneity in consumption responses.

Our findings reveal significant racial disparities in consumption smoothing, with black and Hispanic households experiencing higher welfare costs from income volatility than white households, primarily due to differences in liquid wealth, offering insights into economic inequality and its impact on welfare.

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