The Consumption Response to Liquidity-Enhancing Transfers: Evidence from Italian Earthquakes

Antonio Acconcia, Giancarlo Corsetti and Saverio Simonelli

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Exploiting three Italian earthquakes as quasi-experiments, we analyze the response of homeowners’ consumption to targeted transfers, financing housing reconstruction over time. Like loans, these transfers mainly affect the liquidity of households’ wealth in the short run: we show that they have no effect on consumption over a multi-year horizon. Yet, the access to reconstruction funds has significantly heterogeneous effects on impact: it strongly raises non-durable consumption by households with low liquidity and bank debt (the ‘wealthy-hand-to-mouth’); it makes no difference for liquid households. Consistently, in either group, consumption is insensitive to transfer funds that accrue directly to firms.

Keywords: Consumption; Liquidity; Mortgage; Quasi-experiment; Public Transfers. (search for similar items in EconPapers)
JEL-codes: E21 E62 (search for similar items in EconPapers)
Date: 2015-03-25
New Economics Papers: this item is included in nep-mac
Note: gc422
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: The Consumption Response to Liquidity-Enhancing Transfers: Evidence from Italian Earthquakes (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1553

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