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The Consumption Response to Liquidity-Enhancing Transfers: Evidence from Italian Earthquakes

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  • Antonio Acconcia
  • Giancarlo Corsetti
  • Saverio Simonelli

Abstract

Exploiting three Italian earthquakes as quasi-experiments, we analyze the response of homeowners’ consumption to targeted transfers, financing housing reconstruction over time. Like loans, these transfers mainly affect the liquidity of households’ wealth in the short run: we show that they have no effect on consumption over a multi-year horizon. Yet, the access to reconstruction funds has significantly heterogeneous effects on impact: it strongly raises non-durable consumption by households with low liquidity and bank debt (the ‘wealthy-hand-to-mouth’); it makes no difference for liquid households. Consistently, in either group, consumption is insensitive to transfer funds that accrue directly to firms.

Suggested Citation

  • Antonio Acconcia & Giancarlo Corsetti & Saverio Simonelli, 2015. "The Consumption Response to Liquidity-Enhancing Transfers: Evidence from Italian Earthquakes," Cambridge Working Papers in Economics 1553, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:1553
    Note: gc422
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    Cited by:

    1. Surico, Paolo & Trezzi, Riccardo, 2015. "Consumer Spending and Fiscal Consolidation: Evidence from a Housing Tax Experiment," Finance and Economics Discussion Series 2015-57, Board of Governors of the Federal Reserve System (US), revised 20 Jan 2016.
    2. Javier Andrés & José E. Boscá & Javier Ferri & Cristina Fuentes-Albero, 2018. "Households' balance sheets and the effect of fiscal policy," Working Papers 1831, Banco de España;Working Papers Homepage.

    More about this item

    Keywords

    Consumption; Liquidity; Mortgage; Quasi-experiment; Public Transfers.;

    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

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