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Reported MPC and Unobserved Heterogeneity

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  • Pistaferri, Luigi

Abstract

Panel data on reported marginal propensity to consume (MPC) in the 2010 and 2016 Italy’s Survey of Household Income and Wealth uncover a strong negative relationship between cash-on-hand and MPC. Even though the relationship is attenuated when using regression methods that control for unobserved heterogeneity, the amount of bias is moderate. MPC estimates are used to evaluate the effectiveness of revenue-neutral fiscal policies targeting different parts of the distribution of household resources.

Suggested Citation

  • Pistaferri, Luigi, 2019. "Reported MPC and Unobserved Heterogeneity," CEPR Discussion Papers 14083, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14083
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    More about this item

    Keywords

    Transitory income shocks; Marginal propensity to consume; Panel data;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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