American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Five Facts about MPCs: Evidence from a Randomized Experiment
American Economic Review
vol. 115,
no. 1, January 2025
(pp. 1–42)
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.Citation
Boehm, Johannes, Etienne Fize, and Xavier Jaravel. 2025. "Five Facts about MPCs: Evidence from a Randomized Experiment." American Economic Review, 115 (1): 1–42. DOI: 10.1257/aer.20240138Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- E21 Macroeconomics: Consumption; Saving; Wealth
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs