Liquidity Constraints, the Extended Family, and Consumption

Abstract

This study examines whether the extended family influences consumption. Extending prior tests on food consumption to total

consumption, little to no evidence is found in support of altruism among related households and or that fluctuations in dynastic

income affects one’s own consumption. However, the effect of transitory fluctuations in own income on consumption are contingent on

own wealth and the wealth of the extended family, with estimates of the marginal propensity to consume roughly three times higher for

individuals whose own and extended family wealth is low versus individuals whose own and extended family wealth is high.