We use responses to survey questions in the 2010 Italian Survey of
Household Income and Wealth that ask consumers how much of an
unexpected transitory income change they would consume. The marginal propensity to consume (MPC) is 48 percent on average. We
also find substantial heterogeneity in the distribution, as households
with low cash-on-hand exhibit a much higher MPC than affluent
households, which is in agreement with models with precautionary
savings, where income risk plays an important role. The results have
important implications for predicting household responses to tax
reforms and redistributive policies.
"Fiscal Policy and MPC Heterogeneity."
American Economic Journal: Macroeconomics,
Consumer Economics: Empirical Analysis
Household Saving; Personal Finance
Macroeconomics: Consumption; Saving; Wealth
Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes