Working Paper: CEPR ID: DP14083
Authors: Tullio Jappelli; Luigi Pistaferri
Abstract: Panel data on reported marginal propensity to consume (MPC) in the 2010 and 2016 Italy’s Survey of Household Income and Wealth uncover a strong negative relationship between cash-on-hand and MPC. Even though the relationship is attenuated when using regression methods that control for unobserved heterogeneity, the amount of bias is moderate. MPC estimates are used to evaluate the effectiveness of revenue-neutral fiscal policies targeting different parts of the distribution of household resources.
Keywords: Transitory income shocks; Marginal propensity to consume; Panel data
JEL Codes: D12; D14; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cash on hand (E41) | marginal propensity to consume (MPC) (E21) |
| unobserved heterogeneity (C21) | cash on hand (E41) |
| unobserved heterogeneity (C21) | marginal propensity to consume (MPC) (E21) |
| marginal propensity to consume (MPC) (E21) | cash on hand (E41) |
| cash on hand (E41) | marginal propensity to consume (MPC) (E21) |