This article empirically investigates the effects of income inequality on the marginal propensity to consume (MPC), using panel data of 22 OECD countries over the period 1994–2015. We find that MPC increases dramatically as income inequality increases. In subsample analyses, the MPC of a high inequality group is more than twice that of a low inequality group.
- Income inequality
- Marginal propensity to consume
- consumption function
ASJC Scopus subject areas
- Economics and Econometrics