Francesco Saverio Gaudio
Nathalie Ferrière: nathalie.ferriere[at]sciencespo-aix.fr
Federico Trionfetti: federico.trionfetti[at]univ-amu.fr
We examine the transmission of aggregate supply shocks to the consumption and income of U.S. households, documenting substantial redistributive effects between household groups sorted according to their assetholding position. Positive neutral technology shocks redistribute resources in favor of non-assetholders' income and consumption. By contrast, assetholders' consumption and income display a relatively stronger upward adjustment in response to positive investment-specific technology shocks and shifts in the capital share of income. These facts are consistent with the propagation of supply shocks in models with limited asset market participation, where the relative responsiveness of dividend vs. labor income is key to predicting how a given shock redistributes resources between different households. We show how a fundamental disconnect emerges between macroeconomic and asset-pricing drivers, within this class of models. Shocks to the capital share of income are key in explaining consumption and income inequality, as well as the equity premium, while displaying a modest capacity to explain macroeconomic fluctuations. On the other hand, neutral and investment-specific technology shocks confirm to be major business-cycle drivers, while playing little or no role for asset pricing, for they have little traction on consumption and income inequality.