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Fiscal Policy and MPC Heterogeneity

Tullio Jappelli () and Luigi Pistaferri ()

American Economic Journal: Macroeconomics, 2014, vol. 6, issue 4, 107-36

Abstract: We use responses to survey questions in the 2010 Italian Survey of Household Income and Wealth that ask consumers how much of an unexpected transitory income change they would consume. The marginal propensity to consume (MPC) is 48 percent on average. We also find substantial heterogeneity in the distribution, as households with low cash-on-hand exhibit a much higher MPC than affluent households, which is in agreement with models with precautionary savings, where income risk plays an important role. The results have important implications for predicting household responses to tax reforms and redistributive policies.

JEL-codes: D12 D14 E21 E62 H23 H24 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/mac.6.4.107
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Working Paper: Fiscal Policy and MPC Heterogeneity (2013) Downloads
Working Paper: Fiscal policy and MPC heterogeneity (2013) Downloads
Working Paper: Fiscal Policy and MPC Heterogeneity (2012) Downloads
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