Abstract: We use the quasi-experimental setting of a tax lottery together with administrative and survey data to provide both revealed-preference estimates of the marginal propensity to consumer (MPC) as well as reported-preference estimates for the same sample of households.  Within a depressed economic environment, where there are scarce opportunities for consumer credit, we uncover significantly high MPCs, ranging from 48% to 59%. The estimates from the two methodologies are similar lending credence to the data. There is significant heterogeneity in MPC, and we link it to observable household characteristics. Households report a much higher MPC for unexpected income losses than for gains. This asymmetry is reflected in their reported saving behavior with households limiting their reduction of debt repayment after unexpected losses.

for further information contact patrizia.pellizzari@unibocconi.it