Five facts about MPCs: evidence from a randomized experiment

Boehm, Johannes, Fize, Etienne and Jaravel, Xavier ORCID: 0000-0001-9228-2137 (2024) Five facts about MPCs: evidence from a randomized experiment. CEP Discussion Papers (CEPDP1998). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

We present experimental evidence on the marginal propensity to consume (MPC) out of transitory transfers, distributing prepaid debit cards with different features. The one-month MPC is substantially higher with a card expiring after three weeks (61%), compared to a transfer without expiration (23%). The finding that households consume more when presented with an urgent spending need lends support to theories where the salience of treatments affects choices. We also estimate that the consumption response is concentrated in the first weeks after the transfer and that a large fraction of households has high MPCs, even those with high liquid wealth.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2024 The Author(s)
Divisions:	Centre for Economic Performance Economics
Subjects:	H Social Sciences > HC Economic History and Conditions
JEL classification:	D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth 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:	06 Feb 2025 16:15
Last Modified:	06 Feb 2025 16:15
URI:	http://eprints.lse.ac.uk/id/eprint/126807

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