  This article reviews the economics literature of, primarily, the last 20
years, that studies the link between income shocks and consumption fluctuations
at the household level. We identify three broad approaches through which
researchers estimate the consumption response to income shocks: 1.) structural
methods in which a fully or partially specified model helps identify the
consumption response to income shocks from the data; 2.) natural experiments in
which the consumption response of one group who receives an income shock is
compared to another group who does not; 3.) elicitation surveys in which
consumers are asked how they expect to react to various hypothetical events.
