Impact of Positive and Negative Income Shocks on Household Consumption

Anastasia D. Petaykina – Junior Researcher of the Russian Presidential Academy of National Economy and Public Administration (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The paper analyzes the impact of positive and negative income shocks on household consumption as part of checking the reasons for non-fulfillment of classical consumption theories. The analysis is carried out using data for the period from 2006 to 2019 for individual Russian households available in the RLMS HSE.

The regression of changes in consumption in response to positive and negative changes in income is estimated with the inclusion of the existence of liquidity constraints. The various specifications of the model argue in favor of the existence of liquidity constraints as the reason for the non-fulfillment of the permanent income hypothesis.

The article was written on the basis of the RANEPA state assignment research programme.

Key words: household consumption, income shocks, liquidity constraints, myopia, RLMS.

JEL-codes: C33, E21, P36.