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Five facts about MPCs: Evidence from a randomized experiment

Author

Listed:
  • Johannes Boehm
  • Etienne Fize
  • Xavier Jaravel

Abstract

We present experimental evidence on the marginal propensity to consume (MPC) out of transitory transfers, distributing prepaid debit cards with different features. The one-month MPC is substantially higher with a card expiring after three weeks (61%), compared to a transfer without expiration (23%). The finding that households consume more when presented with an urgent spending need lends support to theories where the salience of treatments affects choices. We also estimate that the consumption response is concentrated in the first weeks after the transfer and that a large fraction of households has high MPCs, even those with high liquid wealth.

Suggested Citation

  • Johannes Boehm & Etienne Fize & Xavier Jaravel, 2024. "Five facts about MPCs: Evidence from a randomized experiment," CEP Discussion Papers dp1998, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1998
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    File URL: https://cep.lse.ac.uk/pubs/download/dp1998.pdf
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