WP 10: Marginal Propensity to Consume Heterogeneity and Redistribuive Policies: The Brazilian Case
In this study, we document, to the best of our knowledge, the first estimates of marginal propensity to consume (MPC) for Brazil. The MPC is considered the main variable used in macroeconomic models to capture the heterogeneity of families’ spending behavior. Due to data limitations in the country, the MPCs were obtained by estimating the income elasticities of consumption for each income group from the Consumer Expenditure Survey (POF) 2017/18. On the one hand, the MPC found for the Bottom 50%, 0.609, and for the Middle 40%, 0.620, are relatively high and do not differ statistically. However, these values fall significantly for the top of the pyramid, 0.483 for the Next 9% and 0.035 for the Top 1%, with the latter not being statistically different from zero. Finally, fiscal multipliers that consider the heterogeneity of MPCs were estimated to assess the impact’s direction of balanced-budget redistributive policies on the economy. In the three scenarios evaluated, with the redistribution of income from the richest to the Bottom 50%, the main result was an increase in the economy’s aggregate product.
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