Does income inequality increase marginal propensity to consume?

Dong-Eun Rhee, Hyoungjong Kim

Research output: Contribution to journalArticle

Abstract

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.

Original languageEnglish
Pages (from-to)1218-1221
Number of pages4
JournalApplied Economics Letters
Volume25
Issue number17
DOIs
Publication statusPublished - 2018 Oct 7

Keywords

  • consumption function
  • Income inequality
  • Marginal propensity to consume

ASJC Scopus subject areas

  • Economics and Econometrics

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