An assessment of the marginal propensity to consume in Italy in the post-Covid recovery

Gaetano Basso (), Francesca Carta (), Concetta Rondinelli (), Federico Tullio () and Francesca Zanichelli ()
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Gaetano Basso: Bank of Italy
Francesca Carta: Bank of Italy
Concetta Rondinelli: Bank of Italy
Federico Tullio: Bank of Italy
Francesca Zanichelli: Bank of Italy

No 1034, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We investigate the decoupling between consumption and income observed in the aftermath of the COVID-19 crisis, focusing on the role of improved labour market conditions. We first estimate differences in households' marginal propensities to consume (MPCs) applying a standard empirical framework to the 2016 and 2022 waves of Banca d'Italia's Survey on Household Income and Wealth, which we treat as representing the pre- and post-pandemic periods. We then assess the contribution of labour market dynamics to changes in the aggregate MPC using an Oaxaca–Blinder-type decomposition method. Finally, combining these estimates with data from Istat’s Labour Force Survey, we evaluate the role of labour market developments in shaping the evolution of the aggregate MPC through 2024. Our results indicate that MPCs declined across households, on average, and that recent employment growth was concentrated among groups with relatively low MPCs, exerting significant downward pressure on the aggregate MPC.

Keywords: consumption pattern; disposable income; Covid-19; demographics; employment (search for similar items in EconPapers)
JEL-codes: C52 D14 E21 J11 J21 (search for similar items in EconPapers)
Date: 2026-07
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_1034_26

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