IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/21913.html

Local Methods for Large Transfers

Author

Listed:
  • Bayer, Christian
  • Briglia, Luigi-Maria
  • Luetticke, Ralph
  • Weiß, Maximilian
  • Winkelmann, Yannik

Abstract

Large fiscal transfers shift households between regions with high and low marginal propensities to consume (MPCs), resulting in nonlinear aggregate responses. We develop a Nonlinear DEGM Update (NDU) method that shifts the wealth distribution nonlinearly over a short time window while solving the aggregate economy using a fast, first-order state-space approximation. A 10 percent transfer of annual GDP increases output by 4.5 percent in the nonlinear and NDU solutions, but by 12.0 percent in the linear solution. The empirical liquid-wealth distribution around zero disciplines this nonlinearity and exhibits a strong asymmetry. A stochastic debt-entry cost closely reproduces this empirical pattern.

Suggested Citation

  • Bayer, Christian & Briglia, Luigi-Maria & Luetticke, Ralph & Weiß, Maximilian & Winkelmann, Yannik, 2026. "Local Methods for Large Transfers," CEPR Discussion Papers 21913, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:21913
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP21913
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • 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; Modern Monetary Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:21913. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CEPR (email available below). General contact details of provider: https://cepr.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.