Affiliation:
1. Stanford University and NBER (email: )
2. Northwestern University and NBER (email: )
3. Harvard University and NBER (email: )
Abstract
We provide a simple framework connecting the distribution of excess savings across households to the dynamics of aggregate demand. Deficit-financed fiscal transfers generate excess savings. The poorest households with the highest marginal propensities to consume (MPCs) spend down their excess savings the fastest, increasing other households' incomes and their excess savings. This leads to a long-lasting increase in aggregate demand until, ultimately, excess savings have “trickled up” to the richest savers with the lowest MPCs, raising wealth inequality.
Publisher
American Economic Association
Cited by
2 articles.
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