The effect of wealth on consumption has been studied extensively in the empirical literature on consumption functions. In this section we provide a brief overview of the findings of these studies. 2 Few studies have examined the relationship between consumption and total wealth for Australia. Tan and Voss (2003) have estimated the marginal propensity to consume (MPC) out of total wealth at or, in other words, that long-run annual consumption increases by 4 cents in response to a one dollar increase in wealth. Bertaut (2002) puts this number marginally higher at . In an earlier study, McKibbin and Richards (1988) found an MPC of , but they point.
