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Liquidity and Consumption. Evidence from three Post-earthquakes Reconstruction Programs in Italy

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Abstract

Exploiting three earthquakes as quasi-experiments, we analyze the response of homeowners’ consumption to public programs financing the costs of housing reconstruction, which increase households’ liquidity significantly in the short run. Although over a multi-year horizon consumption is unaffected, upfront disbursement of funds has a sizable impact on the nondurable consumption of households with low liquidity and bank debt (‘wealthy-handto- mouth’); it makes no difference for liquid households. The consumption of both groups of households is instead insensitive to funds paid directly to firms for reconstruction work, rather than channeled trough households.

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  • Antonio Acconcia & Giancarlo Corsetti & Saverio Simonelli, 2015. "Liquidity and Consumption. Evidence from three Post-earthquakes Reconstruction Programs in Italy," CSEF Working Papers 396, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 16 May 2018.
    • Handle: RePEc:sef:csefwp:396
    Note: This is a substantially revised version of a paper previously circulated with the title “The Consumption Response to Liquidity-Enhancing Transfers: Evidence from Italian Earthquakes”
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    Cited by:

    1. Johar, Meliyanni & Johnston, David W. & Shields, Michael A. & Siminski, Peter & Stavrunova, Olena, 2022. "The economic impacts of direct natural disaster exposure," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 26-39.
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    4. Zach Raff, 2023. "Identifying the regulator’s objective: Does political support matter?," Public Choice, Springer, vol. 194(3), pages 277-295, March.

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    More about this item

    Keywords

    Consumption; Liquidity; Mortgage; Quasi-experiment;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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