State-level spending reacts differently to income changes than national level, impacting economies.
State-level consumption in the US and Canadian provinces reacts differently to changes in income compared to national consumption. States are better at borrowing and lending in response to consumer demand shifts than the entire country. This suggests that individual states can handle income shocks better than the US as a whole. The traditional model of consumption may work better for state-specific income changes than for national data. Further analysis supports this idea but shows that the model still needs some adjustments. The study contrasts these findings with tests of full risk sharing between states.