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  5. Durables and the Marginal Propensity to Spend

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Durables and the Marginal Propensity to Spend

  • Nathan Zorzi
  • Martin Beraja
American Economic Review (Forthcoming)

Abstract

Durables represent a large share of households’ marginal propensity to spend (MPX). We develop a quantitative model of spending that takes durables into account and matches a rich set of empirical regularities simultaneously. Scaling the response of non-durables provides a poor approximation of the MPX on durables when it comes to its distribution in the population, its persistence over time, and its cyclicality. As an application, we study how the MPX varies with the size of stimulus checks and find that it declines more slowly compared to a model of purely non-durable spending.

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