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Marginal Propensity to Consume to Two-Time Income Shocks

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  • Kozo UEDA

Abstract

During the COVID-19 pandemic, the Japanese government provided special cash payments (SCPs) multiple times. This study aims to estimate the marginal propensity to consume (MPC) to these income shocks using detailed bank transaction data. Our findings indicate that the MPC is stable at around 0.2 for both the first wave of SCPs launched in mid-2020 and the second wave of SCPs provided from the end of 2021 to the beginning of 2022. The MPC varies depending on an individual's wealth and liquidity constraints. Specifically, the MPC tends to increase as individuals become less wealthy and more liquidity constrained. JEL Classification Number: D14, E41

Suggested Citation

  • Kozo UEDA, 2023. "Marginal Propensity to Consume to Two-Time Income Shocks," CIGS Working Paper Series 23-008E, The Canon Institute for Global Studies.
    • Handle: RePEc:cnn:wpaper:23-008e
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    References listed on IDEAS

    as
    1. Tullio Jappelli & Luigi Pistaferri, 2020. "Reported MPC and Unobserved Heterogeneity," American Economic Journal: Economic Policy, American Economic Association, vol. 12(4), pages 275-297, November.
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    More about this item

    Keywords

    marginal propensity to consume; special cash payment program; heterogeneity;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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