The response of consumer spending to changes in gasoline prices Michael Gelman, Yuriy Gorodnichenko, Shachar Kariv, Dmitri Koustas, Matthew D. Shapiro, Dan Silverman Steven and Tadelis
Contributor(s): Gelman, Michael
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Material type: 
ArticleSubject(s): GASOLINA | PRECIOS | CONSUMO | RENTA FAMILIAR
In:
American Economic Journal : Macroeconomics v. 15, n. 2, April 2023, p. 129-160Summary: 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.
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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.
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