The Marginal Propensity to Consume During the COVID-19 Pandemic: Evidence from Thailand and Vietnam

Dzung Bui (), Lena Draeger (), Bernd Hayo and Giang Nghiem ()
Additional contact information
Dzung Bui: University of Marburg
Lena Draeger: Leibniz University of Hannover
Giang Nghiem: Leibniz University of Hannover
Authors registered in the RePEc Author Service: Lena Dräger

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: In evaluating surveys conducted in Thailand and Vietnam during the COVID-19 pandemic, we find that the marginal propensity to consume is significantly larger for positive than for negative income shocks. This result contradicts a prediction from the lifecycle permanent income model with borrowing constraints as well as empirical evidence from industrialized countries. However, our finding is consistent with Kahneman and Tversky’s prospect theory, according to which the combination of income uncertainty and loss aversion can induce households to react more strongly to positive than to negative shocks.

Keywords: Marginal propensity to consume (MPC); Unanticipated income shocks; COVID-19; Thailand; Vietnam. (search for similar items in EconPapers)
JEL-codes: D12 D83 E62 E71 H31 (search for similar items in EconPapers)
Pages: 08 pages
Date: 2022
New Economics Papers: this item is included in nep-mac, nep-ore and nep-sea
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Working Paper: The Marginal Propensity to Consume During the COVID-19 Pandemic: Evidence from Thailand and Vietnam (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:202207

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