Estimating Marginal Propensities to Consume in Australia Using Micro Data
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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Volume (Year): 86 (2010)
Issue (Month): s1 (09)
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