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Does income inequality increase marginal propensity to consume?

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  • Dong-Eun Rhee
  • Hyoungjong Kim

Abstract

This article empirically investigates the effects of income inequality on the marginal propensity to consume (MPC), using panel data of 22 OECD countries over the period 1994–2015. We find that MPC increases dramatically as income inequality increases. In subsample analyses, the MPC of a high inequality group is more than twice that of a low inequality group.

Suggested Citation

  • Dong-Eun Rhee & Hyoungjong Kim, 2018. "Does income inequality increase marginal propensity to consume?," Applied Economics Letters, Taylor & Francis Journals, vol. 25(17), pages 1218-1221, October.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:17:p:1218-1221
    DOI: 10.1080/13504851.2017.1412067
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    Cited by:

    1. T. Y. Ivakhnenko & A. V. Polbin, 2022. "Income Inequality and Propensity to Consume in Russia’s Regions," Regional Research of Russia, Springer, vol. 12(3), pages 378-385, September.
    2. Andrew Keinsley & Shu Wu, 2020. "Marginal Income Tax Rates, Economic Growth, and Primary Fiscal Deficits," Public Finance Review, , vol. 48(5), pages 676-705, September.
    3. Nikeel Nishkar Kumar & Arvind Patel & Navneel Shalendra Prasad & Shayal Nandani, 2023. "Loss aversion or hand-to-mouth behaviour in private consumption models," New Zealand Economic Papers, Taylor & Francis Journals, vol. 57(3), pages 247-259, September.

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