Five facts about MPCs: evidence from a randomized experiment

Boehm, Johannes, Fize, Étienne and Jaravel, Xavier ORCID: 0000-0001-9228-2137 (2024) Five facts about MPCs: evidence from a randomized experiment. American Economic Review. ISSN 0002-8282 (In Press)

Text (main_v9) - Accepted Version Pending embargo until 1 January 2100. Download (2MB)

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.

Item Type:	Article
Additional Information:	© 2025
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory Q Science > QA Mathematics
JEL classification:	D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C93 - Field Experiments D - Microeconomics > D9 - Intertemporal Choice and Growth > D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
Date Deposited:	02 Jan 2025 16:54
Last Modified:	02 Jan 2025 17:00
URI:	http://eprints.lse.ac.uk/id/eprint/126550

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