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Estimating Marginal Propensities to Consume in Australia Using Micro Data

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  • LAURA BERGER-THOMSON
  • ELAINE CHUNG
  • REBECCA McKIBBIN

Abstract

This paper uses micro data from the Household, Income and Labour Dynamics in Australia Survey to estimate the marginal propensity to consume (MPC). Estimates are made by examining two types of policy changes - to income tax rates and lump-sum transfers - which help to identify the effect of shocks to income on consumption. Using a fixed effects model the point estimate of MPC out of the tax cuts is around 1.0 and out of the Baby Bonus is at least 0.1. The paper also explores differences in the MPC across households according to measures of liquidity constraints and unemployment risks. Copyright © 2010 The Economic Society of Australia.

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Bibliographic Info

Article provided by The Economic Society of Australia in its journal Economic Record.

Volume (Year): 86 (2010)
Issue (Month): s1 (09)
Pages: 49-60

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Handle: RePEc:bla:ecorec:v:86:y:2010:i:s1:p:49-60

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Cited by:
  1. Petr Jakubík, 2011. "Household Balance Sheets and Economic Crisis," Working Papers IES 2011/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2011.

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