DOI: https://doi.org/10.52903/wp2022293
DISAGGREGATE INCOME AND WEALTH EFFECTS ON PRIVATE
CONSUMPTION IN GREECE
Dimitrios Sideris
Bank of Greece and Panteion University
Georgia Pavlou
Bank of Greece
Abstract
The aim of the
present paper is to identify the main determinants of private consumption in
Greece for the recent period 2003:Q1- 2020:Q1. The issue is of particular
interest for Greece, now that the economy is trying to return to a sustainable
growth path following the pandemic episode, since private consumption
constitutes the main component of Greek GDP. The study analyses the
determinants of private consumption, paying particular attention to the
significance of income and wealth. The major novelty of the paper with respect
to the Greek literature on consumption is that it assumes that different types
of income play a different role in consumers’ behavior: so, disposable income is decomposed into its labour and non-labour
components. To this end, four alternative measures of labour income are
computed based on quarterly non-financial accounts data of the households’
sector. The results indicate that decomposing disposable
income is essential for analyzing private consumption. Labour income turns out
to be the most important determinant of private consumption in Greece in the
long and the short run. Thus, labour income should primarily be monitored and
targeted by the policy makers, in their policies aiming at domestic demand and
GDP growth.
Keywords: Private Consumption, Labour income, Wealth, Cointegration, Error correction model.
JEL Classification: E21, E44, C22, D12
Acknowledgments: We thank Dimitrios Malliaropulos, Hiona Balfoussia and Filippos Petroulakis for helpful comments and suggestions. The views expressed in this paper are the authors’ own and do not necessarily represent those of the institutions to which they are affiliated.
Correspondence:
Dimitrios Sideris
Bank of Greece
21 E. Venizelos Ave.
10250, Athens
Tel. 210-320 2039, 2588
Fax 210-320 3934
dsideris@bankofgreece.gr