We present five facts from an experiment on the marginal propensity to consume (MPC) out of transitory transfers: (1) the one-month MPC on a cash-like transfer is 23 percent; (2) it is substantially higher (61 percent) on a transfer administered via a card where remaining funds expire after three weeks, inconsistent with money fungibility; (3) the consumption response is concentrated in the first three weeks; (4) MPCs vary with household characteristics but are high even for the liquid wealthy; (5) unconditional MPC distribution exhibits large variation. Our findings inform the design of stimulus policies and pose challenges to existing macroeconomic models.

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1 January 2025

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American Economic Review 115(1) , pp.1-42, 2025

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DOI: 10.1257/aer.20240138

https://www.aeaweb.org/articles?id=10.1257/aer.20240138

This Journal article is published under the centre's Trade programme, Growth programme.