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Liquidity and Consumption. Evidence from three Post-earthquakes Reconstruction Programs in Italy

Antonio Acconcia (), Giancarlo Corsetti () and Saverio Simonelli
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Antonio Acconcia: Università di Napoli Federico II and CSEF,

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: Exploiting three earthquakes as quasi-experiments, we analyze the response of homeowners’ consumption to public programs financing the costs of housing reconstruction, which increase households’ liquidity significantly in the short run. Although over a multi-year horizon consumption is unaffected, upfront disbursement of funds has a sizable impact on the nondurable consumption of households with low liquidity and bank debt (‘wealthy-handto- mouth’); it makes no difference for liquid households. The consumption of both groups of households is instead insensitive to funds paid directly to firms for reconstruction work, rather than channeled trough households.

Keywords: Consumption; Liquidity; Mortgage; Quasi-experiment (search for similar items in EconPapers)
JEL-codes: E21 E62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur and nep-mac
Date: 2015-03-25, Revised 2018-05-16
Note: This is a substantially revised version of a paper previously circulated with the title “The Consumption Response to Liquidity-Enhancing Transfers: Evidence from Italian Earthquakes”
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Forthcoming in American Economic Journal: Macroeconomics

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