We highlight four areas where frameworks that do not explicitly model wealthy HtM households provide misguided intuitions about the effects of fiscal policy: the degree of nonlinearity of the marginal propensity to consume
with respect to the transfer size, the asymmetry of the consumption response with respect to equal-size income windfalls and losses, the optimal phasing-out of stimulus payments with income for maximizing the impact on aggregate consumption, and the extent of cross-country dispersion in consumption responses to a fiscal transfer.
The model proposed in the paper not only confirms this proposition, but it also indicates that the marginal propensity to consume
has a theoretical basis for modifying velocity, money demand and consumption.
0 Predicted expenditure (buyers only) $536 $503 Marginal propensity to consume
Furthermore, because both the consumption and wealth responses to productivity disturbances are nonlinear, the measured marginal propensity to consume
out of wealth is unlikely to be constant.
In other words, the marginal propensity to consume
leisure out of wealth shocks is about .
We now describe our approach to estimating the marginal propensity to consume
out of wealth and labor income.
The Blundell, Pistaferri, and Preston (2008) estimator of the transmission coefficient of transitory income shocks to consumption, the marginal propensity to consume
(MPC), is given by
My results do indicate that the long-term marginal propensity to consume
out of wealth declined somewhat during the 1990s, as suggested in Poterba (2000).
65-to-74 age group Model and category 1984 1997 Total expenditures (quarterly) 6,016 6,513 Food at home: Expenditure $813 $782 Marginal propensity to consume
The marginal propensity to consume
out of a deficit financed tax cut is considerably lower than the Keynesian consumption propensity proposed by Barsky, Mankiw, and Zeldes .
The actual surplus from which debt service payments are made is determined mainly by two factors: (i) the productivity of capital, and (ii) the marginal propensity to consume
In addition, estimates from econometric studies suggest that in Japan the marginal propensity to consume
out of wealth is relatively small.