The DOI matches its Crossref record; 58 of the 58 references it cites were found in a registry or an index.
The Marginal Propensity to Consume in Heterogeneous Agent Models
Abstract
What model features and calibration strategies yield a large average marginal propensity to consume (MPC) in heterogeneous agent models? Through a systematic investigation of models with different preferences, dimensions of ex-ante heterogeneity, income processes, and asset structures, we show that the most important factor is the share and type of hand-to-mouth households. One-asset models either feature a trade-off between a high average MPC and a realistic level of aggregate wealth or generate an excessively polarized wealth distribution that vastly understates the wealth held by households in the middle of the distribution. Two-asset models that include both liquid and illiquid assets can resolve this tension with a large enough gap between liquid and illiquid returns. We discuss how such return differential can be justified from the perspective of theory and data.
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“The estimates based on BP in column 1 are closely in line with the literature: typical estimates of the quarterly MPX for all expenditures range from 50 to 90%, while estimates of the quarterly MPX for non-durable expenditure range from 15 to 25%.”
From Revisiting Event-Study Designs: Robust and Efficient Estimation (2024) · cites this paper as Kaplan and Violante (2022)
Citations
Cites
Golden eggs and hyperbolic discounting
Laibson, D. (1997) · The Quarterly Journal of Economics · doi:10.1162/003355397555253 · Cited by 6,122
Consumption and Liquidity Constraints: An Empirical Investigation
Zeldes, S. P. (1989) · Journal of Political Economy · doi:10.1086/261605 · Cited by 1,933
Epstein, L. G., & Zin, S. E. (1991) · Journal of Political Economy · doi:10.1086/261750 · Cited by 1,784
Saving and Liquidity Constraints
Deaton, A. (1991) · Econometrica · doi:10.2307/2938366 · Cited by 1,653
Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence
Campbell, J. Y., & Mankiw, N. G. (1989) · NBER Macroeconomics Annual · doi:10.1086/654107 · Cited by 1,509
Household Balance Sheets, Consumption, and the Economic Slump*
Mian, A., Rao, K., & Sufi, A. (2013) · The Quarterly Journal of Economics · doi:10.1093/qje/qjt020 · Cited by 1,507
Monetary Policy According to HANK
Kaplan, G., Moll, B., & Violante, G. L. (2018) · American Economic Review · doi:10.1257/aer.20160042 · Cited by 1,436
Self-citationTaylor, J. B., Woodford, M., & Uhlig, H. (1999) · RePEc: Research Papers in Economics · Cited by 1,291
Gül, F., & Pesendorfer, W. (2001) · Econometrica · doi:10.1111/1468-0262.00252 · Cited by 1,208
Household Expenditure and the Income Tax Rebates of 2001
Johnson, D., Parker, J. A., & Souleles, N. S. (2006) · American Economic Review · doi:10.1257/aer.96.5.1589 · Cited by 1,008
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Revisiting Event-Study Designs: Robust and Efficient Estimation
Borusyak, K., Jaravel, X., & Spiess, J. (2024) · Review of Economic Studies · doi:10.1093/restud/rdae007 · Cited by 2,280
Revisiting event study designs: robust and efficient estimation
(2022) · arXiv (preprint) · doi:10.47004/wp.cem.2022.1122 · Cited by 607
The Intertemporal Keynesian Cross
Auclert, A., Rognlie, M., & Straub, L. (2024) · Journal of Political Economy · doi:10.1086/732531 · Cited by 114
Wealth, Race, and Consumption Smoothing of Typical Income Shocks
Ganong, P., Jones, D., Noel, P., Greig, F. E., Farrell, D., & Wheat, C. (2020) · National Bureau of Economic Research · doi:10.3386/w27552 · Cited by 103
Lenza, M., & Slačálek, J. (2024) · Journal of Applied Econometrics · doi:10.1002/jae.3053 · Cited by 73
Metadata
- Authors
- Kaplan, G., & Violante, G. L.
- Affiliations
- National Bureau of Economic Research (US)
- University of Copenhagen (DK)
- Venue
- Annual Review of Economics
- Publisher
- Annual Reviews
- Published
- 2022-08-12
- Volume
- 14
- Issue
- 1
- Pages
- 747-775
- ISSN
- 1941-1383 (ISSN-L)
- 1941-1391
- OpenAlex
- W4290851807
- Cited by
- 116
- References
- 58
- Citations by year
- 2026: 18 · 2025: 30 · 2024: 35 · 2023: 24 · 2022: 8
- FWCI
- 4.49
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Annual Review of Economics (publishedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic theories and models
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Economic Theory and Policy
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Complex Systems and Time Series Analysis
- Keywords
- marginal propensity to consume, heterogeneous agent model, hand-to-mouth households, wealth distribution, model calibration, household preferences, aggregate wealth, return differentials
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