American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Fiscal Policy and MPC Heterogeneity
American Economic Journal: Macroeconomics
vol. 6,
no. 4, October 2014
(pp. 107–36)
Abstract
We use responses to survey questions in the 2010 Italian Survey of Household Income and Wealth that ask consumers how much of an unexpected transitory income change they would consume. The marginal propensity to consume (MPC) is 48 percent on average. We also find substantial heterogeneity in the distribution, as households with low cash-on-hand exhibit a much higher MPC than affluent households, which is in agreement with models with precautionary savings, where income risk plays an important role. The results have important implications for predicting household responses to tax reforms and redistributive policies.Citation
Jappelli, Tullio, and Luigi Pistaferri. 2014. "Fiscal Policy and MPC Heterogeneity." American Economic Journal: Macroeconomics, 6 (4): 107–36. DOI: 10.1257/mac.6.4.107Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D14 Household Saving; Personal Finance
- E21 Macroeconomics: Consumption; Saving; Wealth
- E62 Fiscal Policy
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
There are no comments for this article.
Login to Comment