'Less Is More': Consumer Spending and the Size of Economic Stimulus Payments

Michelle Andreolli and Paolo Surico

American Economic Journal: Macroeconomics, 2026, vol. 18, issue 1, 34-68

Abstract: We study how consumption responds to unexpected, transitory income gains of different sizes using hypothetical questions from the Italian Survey of Household Income and Wealth. Affluent households exhibit higher marginal propensities to consume (MPCs) out of large gains, while liquidity-poor families show higher MPCs out of small gains. The spending patterns of higher earners align with models featuring non-homothetic preferences, whereas borrowing constraints explain the heterogeneity among low-income households. Our findings imply that, for a given fiscal outlay, distributing smaller transfers to a broader group of low-income households stimulates aggregate consumption more effectively than concentrating larger transfers among fewer recipients.

JEL-codes: D12 E21 E62 G51 H23 (search for similar items in EconPapers)
Date: 2026
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mac.20220169 (application/pdf)
https://www.aeaweb.org/articles/materials/24361 (application/pdf)
https://www.aeaweb.org/articles/materials/24362 (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmac:v:18:y:2026:i:1:p:34-68

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/mac.20220169

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().