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  4. November 2020
  5. Reported MPC and Unobserved Heterogeneity

American Economic Journal:
Economic Policy

ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)

Reported MPC and Unobserved Heterogeneity

  • Tullio Jappelli
  • Luigi Pistaferri
American Economic Journal: Economic Policy
vol. 12, no. 4, November 2020
(pp. 275–97)
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Abstract

Panel data on reported marginal propensity to consume in the 2010 and 2016 Italian 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.

Citation

Jappelli, Tullio, and Luigi Pistaferri. 2020. "Reported MPC and Unobserved Heterogeneity." American Economic Journal: Economic Policy, 12 (4): 275–97. DOI: 10.1257/pol.20180420

Additional Materials

JEL Classification

  • E21 Macroeconomics: Consumption; Saving; Wealth
  • E62 Fiscal Policy
  • G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
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