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  5. Five Facts About MPCs: Evidence from a Randomized Experiment

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Five Facts About MPCs: Evidence from a Randomized Experiment

  • Johannes Boehm
  • Etienne Fize
  • Xavier Jaravel
American Economic Review (Forthcoming)

Abstract

We present five facts from an experiment on the marginal propensity to consume (MPC) out of transitory transfers: (1) the one-month MPC on a cash-like transfer is 23%; (2) it is substantially higher (61%) on a transfer administered via a card where the remaining funds expire after three weeks, inconsistent with money fungibility; (3) the consumption response is concentrated in the first three weeks; (4) MPCs vary with household characteristics, but are high even for the liquid-wealthy; (5) the unconditional MPC distribution exhibits large variation. Our findings inform the design of stimulus policies and pose challenges to existing macroeconomic models.

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