Estimation of household heterogeneous propensity to consume in the Russian Federation based on latent class model

This paper estimates heterogeneous parameters of the household consumer choice in the Russian Federation based on the latent class model, assuming that households have adaptive expectations. The main parameters to be estimated are: the marginal propensity to consume and the parameter of adaptive expectations. To obtain these parameters, the latent class model is estimated based on panel data on household consumption and income. The average value of parameter estimation with regard to marginal propensity to consume is 0.57 with a standard deviation of 0.17; the average value of the adaptive expectations parameter is 0.52 with a standard deviation of 0.11. The paper also analyses the consumer choice parameters under different social characteristics of households and different subjects of the Russian Federation. The obtained estimates of the sensitivity of consumption against changes in income can be applied to assess the macroeconomic effects of economic policy, as well as to build and calibrate agent-based macroeconomic models, including heterogeneous preferences of households. This paper constructed a simplified agent-based model to compare fiscal multipliers of social transfers to households.