The Consumption Response to Liquidity-enhancing Transfers: Evidence from Italian Earthquakes
نویسندگان
چکیده
Exploiting three Italian earthquakes as quasi-experiments, we analyze the response of homeowners’ consumption to transfers targeted to finance housing reconstruction over time—which, like loans, mainly affect the liquidity of households’ wealth in the short run. We show that transfers that have no effect on consumption over a multi-year horizon, can have significant heterogeneous effects on impact. The access to reconstruction funds strongly raises non-durable consumption by households with low liquidity and bank debt, but makes no difference for liquid households, or when cash accrues directly to firms—in line with recent analyses of the consumption dynamics of ‘wealthy hand-to-mouth.’ JEL classification: E21, E62
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