Helicopter money in Europe: New evidence on the marginal propensity to consume across European households

Autor: Peter Lindner, Katharina Drescher, Pirmin Fessler
Jazyk: angličtina
Rok vydání: 2020
Předmět:
Zdroj: Economics Letters
ISSN: 0165-1765
Popis: The recent spread of COVID-19 has led to the worst economic crisis since the 1930s. To boost demand after the crisis, direct monetary transfers to households are being discussed. Using novel microdata from the Eurosystem Household Finance and Consumption Survey (HFCS), we study how much of such a transfer households would actually spend. We do so by exploiting the unique opportunity that the new wave of the survey included an experimental question to calculate the marginal propensity to consume from hypothetical windfall gains. Our results show that households on average spend between about 33% (the Netherlands) and 57% (Lithuania) of such a transfer. In all countries, answers are clustered at spending nothing, spending 50% and spending everything. Marginal propensities to consume decrease with income but are not as clearly related to wealth.
Highlights • We discuss helicopter money as an option to boost demand after the COVID-19 crisis. • Marginal propensity to consume across Euro area countries is between 33% and 57%. • Marginal propensity to consume decreases with income but is unrelated to wealth. • Helicopter money would lead to heterogenous effects across and within countries. • Lump-sum transfers might be preferable to inequality-preserving transfers.
Databáze: OpenAIRE
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