Beyond income: Housing versus stock market wealth effects on U.S. state-level consumption, 1975-2012
Gregory Brock
Independent Researcher, United States.
https://orcid.org/0009-0003-1946-9378
Vicente German-Soto
Faculty of Economics, Autonomous University of Coahuila, Unidad Camporredondo, Edificio “E”, C.P. 25000, Saltillo, Mexico.
https://orcid.org/0000-0001-5844-1296
DOI: https://doi.org/10.20448/growth.v13i1.8310
Keywords: Aggregate consumption convergence, Consumption convergence, Dynamic panel data, Financial literacy, GMM analysis, Housing wealth, Spatial dependence, Stock market wealth.
Abstract
This study examines the long-run relationship between housing wealth, stock market wealth, personal income, and real consumption across U.S. states over the period 1975–2012, with a focus on consumption convergence and the relative influence of different wealth types. A panel dataset of U.S. states is analyzed using system-GMM estimation to assess the effects of housing and stock market wealth on consumption while controlling for personal income and spatial dependence. Real consumption rises steadily with both wealth types and personal income, though long-run consumption convergence is low at 0.6%. Stock market wealth generally exerts a greater influence on consumption than housing wealth, except during the early 2000s housing bubble. Spatial dependence between wealth and consumption is statistically weak, yet both wealth types consistently and positively support higher consumption. Both the stock market and housing wealth are significant drivers of consumption, with their relative impact shifting across different economic periods, highlighting the importance of monitoring asset market dynamics at the state level. Promoting broader financial literacy is essential to help households allocate wealth effectively between stock and housing markets, supporting household financial well-being and contributing to macroeconomic stability.