MPCs through COVID: spending, saving and private transfers

Hamish Low; Thomas F. Crossley; Peter Levell; Paul Fisher

doi:10.1920/wp.ifs.2020.3520

MPCs through COVID: spending, saving and private transfers

Published on 20 October 2020

This Working Paper has been replaced by MPCs in an economic crisis: spending, saving and private transfers

This working paper looks at the marginal propensity to consume from a representative sample of UK adults in July 2020. Reported MPCs are low, around 11% on average. They are higher, but still modest, for individuals in households with high current needs.

MPCs were directly elicited from a representative sample of UK adults in July 2020. Reported MPCs are low, around 11% on average. They are higher, but still modest, for individuals in households with high current needs. These low MPCs may be a consequence of the prevailing economic uncertainty. Some respondents report that they would respond to a one-time income payment by transferring more to friends and family, others report they would see a decline in the payments received. Targeting payments to high-MPC individuals could be partly undone. Further, the aggregate MPC out of a stimulus payment need not equal the population-average MPC, even if all individuals receive the same payment.