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We study the consumption response to unexpected transitory income gains of different size, using hypothetical questions from the Italian Survey of Household Income and Wealth. Affluent households exhibit a higher Marginal Propensity to Consume (MPC) out of large gains while families with low cash-on-hand display a higher MPC out of small gains. We show that the spending of higher earners is consistent with the predictions of a model with non-homothetic preferences on consumption while the MPC heterogeneity across shock size for low-income families can be accounted for by borrowing constraints.
