Working Paper: CEPR ID: DP10698
Authors: Antonio Acconcia; Giancarlo Corsetti; Saverio Simonelli
Abstract: Exploiting three Italian earthquakes as quasi-experiments, we analyze the response of homeowners' consumption to targeted transfers, financing housing reconstruction over time. Like loans, these transfers mainly affect the liquidity of households' wealth in the short run: we show that they have no effect on consumption over a multi-year horizon. Yet, the access to reconstruction funds has significantly heterogeneous effects on impact: it strongly raises non-durable consumption by households with low liquidity and bank debt (the `wealthy-hand-to-mouth'); it makes no difference for liquid households. Consistently, in either group, consumption is insensitive to transfer funds that accrue directly to firms.
Keywords: consumption; liquidity; mortgage; public transfers; quasi-experiments
JEL Codes: E21; E61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| liquidity-enhancing transfers (F16) | household consumption (D10) |
| reconstruction funds (H84) | nondurable consumption for illiquid households (E21) |
| cash transfers (F24) | consumption response (D12) |
| in-kind transfers (H49) | consumption response (D12) |
| liquidity-enhancing transfers (F16) | consumption of wealthy hand-to-mouth households (D12) |
| liquidity-enhancing transfers (F16) | consumption of liquid households (D10) |