The Consumption Response to Liquidity-Enhancing Transfers: Evidence from Italian Earthquakes
Antonio Acconcia (),
Giancarlo Corsetti () and
No 10698, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Exploiting three Italian earthquakes as quasi-experiments, we analyze the response of homeowners' consumption to targeted transfers, financing housing reconstruction over time. Like loans, these transfers mainly affect the liquidity of households' wealth in the short run: we show that they have no effect on consumption over a multi-year horizon. Yet, the access to reconstruction funds has significantly heterogeneous effects on impact: it strongly raises non-durable consumption by households with low liquidity and bank debt (the `wealthy-hand-to-mouth'); it makes no difference for liquid households. Consistently, in either group, consumption is insensitive to transfer funds that accrue directly to firms.
Keywords: Consumption; Liquidity; Mortgage; Public Transfers; Quasi-experiments (search for similar items in EconPapers)
JEL-codes: E21 E61 (search for similar items in EconPapers)
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Working Paper: The Consumption Response to Liquidity-Enhancing Transfers: Evidence from Italian Earthquakes (2015)
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