American Economic Review Vol. 115 No. 1 2025
Five Facts about MPCs: Evidence from a Randomized Experiment
open access
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.
- DOI
- 10.1257/aer.20240138
- Volume
- 115
- Issue
- 1
- Pages
- 1-42
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref