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Abstract

Liquidity Constraints, the Extended Family, and Consumption
HwaJung Choi, Kathleen McGarry and Robert F. Schoeni
WP 2015-320

This study examines whether the extended family influences consumption. Extending prior tests on food consumption to total consumption, little to no evidence is found in support of altruism among related households and or that fluctuations in dynastic income affects one’s own consumption. However, the effect of transitory fluctuations in own income on consumption are contingent on own wealth and the wealth of the extended family, with estimates of the marginal propensity to consume roughly three times higher for individuals whose own and extended family wealth is low versus individuals whose own and extended family wealth is high.

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