The Trickling Up of Excess Savings

Adrien Auclert, Matthew Rognlie and Ludwig Straub

No 17872, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We provide a simple framework connecting the distribution of excess savings across house- holds to the dynamics of aggregate demand. Deficit-financed fiscal transfers generate excess savings. The poorest households with the highest 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.

Keywords: Distribution (search for similar items in EconPapers)
JEL-codes: E21 E62 (search for similar items in EconPapers)
Date: 2023-02
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Journal Article: The Trickling Up of Excess Savings (2023)
Working Paper: The Trickling Up of Excess Savings (2023)
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