Five Facts about MPCs: Evidence from a Randomized Experiment

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%; (2) it is substantially higher (61%) on a transfer administered via a card where the 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) the unconditional MPC distribution exhibits large variation. Our findings inform the design of stimulus policies and pose challenges to existing macroeconomic models.

Etienne Fize is an economist at IPP (Institut des Politiques Publiques) - PSE (Paris School of Economics). He received his PhD in economics in June 2019 from Sciences Po Paris. His research interests include Public Economics, Political Economy, Consumption dynamics, Media Economics, and International Trade.