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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