Non-Symmetric Response of Consumption to Change in Income

This study is aimed to compare the reactions of household consumption on positive and negative income changes. The hypothesis of the research is the presence of asymmetry in reactions between these two groups. The analysis is based on two representative samples of RLMS-HSE survey data collected in 2006-2007 and 2016-2017. The set of controls for household and personal characteristics (e.g. age, sex, education level, family size, etc.) are considered. The estimation of marginal propensity to consume (MPC) on 2016-2017 years data reveals higher MPCs of households which had a fall in income than MPCs of households which had a rise in it, while estimation on 2006-2007 data shows the opposite result (lower MPCs for negative income changes). This indicates the role of global economic circumstances in the asymmetric effects of MPCs. Furthermore, personal and household characteristics, the proportion of income change, and the level of household wealth have shown the effect on the size of consumption reaction to change in income. These findings could be practically used while implementing contractionary and expansionary macroeconomic policies.