The Trickling Up of Excess Savings

Adrien Auclert, Matthew Rognlie and Ludwig Straub

AEA Papers and Proceedings, 2023, vol. 113, 70-75

Abstract: We provide a simple framework connecting the distribution of excess savings across households to the dynamics of aggregate demand. Deficit-financed fiscal transfers generate excess savings. The poorest households with the highest marginal propensities to consume (MPCs) spend down their excess savings the fastest, increasing other households' incomes and their excess savings. This leads to a long-lasting increase in aggregate demand until, ultimately, excess savings have "trickled up" to the richest savers with the lowest MPCs, raising wealth inequality.

JEL-codes: D11 D31 E21 E52 G51 (search for similar items in EconPapers)
Date: 2023
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Working Paper: The Trickling Up of Excess Savings (2023)
Working Paper: The Trickling Up of Excess Savings (2023)
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DOI: 10.1257/pandp.20231027

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