Liquidity and Consumption: Evidence from Three Post-earthquake Reconstruction Programs in Italy
- (pp. 319-46)
Abstract
In Italian regions hit by earthquakes, homeowners typically receive public funds to finance reconstruction. While these funds are strictly tied to reconstruction work, they are in part disbursed up front, leading to significant variation in cash on hand. We exploit this variation to study the effects of liquidity on relatively wealthy households' consumption. We find a large and significant response in the first year that homeowners receive the cash and provide evidence that this response is driven by illiquid households with bank debt. Instead, we find no evidence that consumption responds to funds paid directly to firms, thus leaving households' liquidity unaffected.Citation
Acconcia, Antonio, Giancarlo Corsetti, and Saverio Simonelli. 2020. "Liquidity and Consumption: Evidence from Three Post-earthquake Reconstruction Programs in Italy." American Economic Journal: Macroeconomics, 12 (3): 319-46. DOI: 10.1257/mac.20180190Additional Materials
JEL Classification
- E21 Macroeconomics: Consumption; Saving; Wealth
- G51 Household Saving, Borrowing, Debt, and Wealth
- H76 State and Local Government: Other Expenditure Categories
- Q54 Climate; Natural Disasters and Their Management; Global Warming
- R31 Housing Supply and Markets
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