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Undergraduate Economic Review

Abstract

Individual consumption and saving decisions are integral to aggregate economic growth, demonstrated in economic theories such as the exogenous growth model. Behavioral economists have posited that a “wealth effect” plays a factor in individual consumption patterns. In this paper, I use the 1999-2007 cohorts of the Panel Survey of Income Dynamics to explore evidence of a wealth effect in stock equity and fixed income. Using panel data estimation techniques, I find no evidence of a wealth effect stemming from equity or fixed income gains among individuals with concentrated financial wealth.

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