The Marginal Propensity to Consume in a Depressed Economy: Estimates from a Lottery and Administrative Data

Abstract

We use the quasi-experimental setting of a tax lottery together with administrative and survey data to provide reported-preference and revealed-preference estimates of the marginal propensity to consumer (MPC).  In the depressed economic environment of Greece, providing scarce opportunities for consumer credit, we uncover significantly higher MPCs than previous literature. There is significant heterogeneity in MPC, and we link it to observable household characteristics.  

The paper is co-authored with Christos Kotsogiannis (University of Exeter).