The Trickling Up of Excess Savings
AEA Papers and Proceedings
vol. 113,
May 2023
(pp. 70-75)
Abstract
We provide a simple framework connecting the distribution of excess savings across households to the dynamics of aggregate demand. Deficit-financed fiscal transfers generate excess savings. The poorest households with the highest marginal propensities to consume (MPCs) spend down their excess savings the fastest, increasing other households' incomes and their excess savings. This leads to a long-lasting increase in aggregate demand until, ultimately, excess savings have "trickled up" to the richest savers with the lowest MPCs, raising wealth inequality.Citation
Auclert, Adrien, Matthew Rognlie, and Ludwig Straub. 2023. "The Trickling Up of Excess Savings." AEA Papers and Proceedings, 113: 70-75. DOI: 10.1257/pandp.20231027Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D31 Personal Income, Wealth, and Their Distributions
- E21 Macroeconomics: Consumption; Saving; Wealth
- E52 Monetary Policy
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth