Human Frictions in the Transmission of Economic Policies

Francesco D’Acunto, Daniel Hoang, Maritta Paloviita () and Michael Weber

No 29279, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many consumers below the top of the distribution of a representative population by cognitive abilities barely react to monetary and fiscal policies that aim to stimulate consumption and borrowing, even when they are financially unconstrained and despite substantial debt capacity. Differences in income, formal education levels, economic expectations, and a large set of registry-based demographics do not explain these facts. Heterogeneous cognitive abilities thus act as human frictions in the transmission of economic policies that operate through the household sector and might imply redistribution from low- to high-cognitive-ability agents. We conclude by discussing how our findings inform the microfoundation of behavioral macroeconomic theory.

JEL-codes: D12 D84 D91 E21 E31 E32 E52 E65 E70 E71 (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-fdg, nep-hpe, nep-mac and nep-mon
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