The Consumption Response to Liquidity-Enhancing Transfers: Evidence from Italian Earthquakes

31 Pages Posted: 13 Jul 2015

See all articles by Antonio Acconcia

Antonio Acconcia

CSEF - University of Naples Federico II - Department of Economics

Giancarlo Corsetti

University of Cambridge; University of Rome III - Department of Economics; Centre for Economic Policy Research (CEPR)

Saverio Simonelli

University of Naples Federico II - Department of Economics and Statistics; Centre for Studies in Economics and Finance (CSEF)

Date Written: July 2015

Abstract

Exploiting three Italian earthquakes as quasi-experiments, we analyze the response of homeowners' consumption to targeted transfers, financing housing reconstruction over time. Like loans, these transfers mainly affect the liquidity of households' wealth in the short run: we show that they have no effect on consumption over a multi-year horizon. Yet, the access to reconstruction funds has significantly heterogeneous effects on impact: it strongly raises non-durable consumption by households with low liquidity and bank debt (the 'wealthy-hand-to-mouth'); it makes no difference for liquid households. Consistently, in either group, consumption is insensitive to transfer funds that accrue directly to firms.

Keywords: Consumption, Liquidity, Mortgage, Public Transfers, Quasi-experiments

JEL Classification: E21, E61

Suggested Citation

Acconcia, Antonio and Corsetti, Giancarlo and Simonelli, Saverio, The Consumption Response to Liquidity-Enhancing Transfers: Evidence from Italian Earthquakes (July 2015). CEPR Discussion Paper No. DP10698, Available at SSRN: https://ssrn.com/abstract=2630126

Antonio Acconcia (Contact Author)

CSEF - University of Naples Federico II - Department of Economics ( email )

Via Cintia Monte S. Angelo
Napoli, 80126
Italy

Giancarlo Corsetti

University of Cambridge ( email )

University of Rome III - Department of Economics ( email )

via Ostiense 139
Rome, 00154
Italy
+39 06 5737 4056 (Phone)
+39 06 5737 4093 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Saverio Simonelli

University of Naples Federico II - Department of Economics and Statistics ( email )

Via Cinthia - Monte S. Angelo
Napoli, Napoli 80126
Italy
0039 081 675366 (Phone)

HOME PAGE: http://www.csef.it/Simonelli

Centre for Studies in Economics and Finance (CSEF) ( email )

Via Cintia - Monte S. Angelo
Napoli, 80126
Italy

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