Five facts about MPCs: evidence from a randomized experiment

Boehm, Johannes, Fize, Étienne and Jaravel, Xavier ORCID: 0000-0001-9228-2137 (2025) Five facts about MPCs: evidence from a randomized experiment. American Economic Review, 115 (1). 1 - 42. ISSN 0002-8282

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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 percent; (2) it is substantially higher (61 percent) on a transfer administered via a card where 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) 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 American Economic Association
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 D - Microeconomics > D9 - Intertemporal Choice and Growth > D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth G - Financial Economics > G0 - General > G00 - General I - Health, Education, and Welfare > I3 - Welfare and Poverty > I38 - Government Policy; Provision and Effects of Welfare Programs
Date Deposited:	02 Jan 2025 16:54
Last Modified:	01 Feb 2025 00:00
URI:	http://eprints.lse.ac.uk/id/eprint/126550

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