This project is co-led by Professor Plutarchos Sakellaris of the Athens University of Economics and Business

The research project is supported by the Hellenic Foundation for Research and Innovation (H.F.R.I.) under the 4th Call for Action “Science and Society”- Emblematic Action – “Interventions to address the economic and social effects of the COVID-19 pandemic” (project ID: FISCALCONS 05007)

Direct Stimulus Payments to Individuals in the COVID-19 Pandemic

Direct Stimulus Payments

'Direct Stimulus Payments to Individuals in the Covid-19 Pandemic' is a project led by Professors Plutarchos Sakellaris from the Athens University of Economics and Business, and Christos Kotsogiannis from the Tax Administration Research Centre, University of Exeter Business School.  It is supported by the Hellenic Foundation for Research and Innovation and runs from November 2021 to November 2022.

 The main economic instrument used by governments to soften the adverse economic condequences from COVID-19 has taken the form of transfer payments to households.  The goal of these transfers is twofold:

  • First, to support the welfare of those hit by unemployment, or other shocks, by sustaining their consumption
  • Second, to boost the macroeconomy through the secondary effects of immediate household spending

As most countries are constrained by their debt burden in the amount of fiscal resources they can bring to the war against COVID-19, it is important to design fiscal policies carefully for optimal results. How much of an unexpected income transfer would the household spend for consumption during a short horizon? In other words, what is households’ Marginal Propensity to Consume (MPC) out of transitory income?

In the proposed project, our objective is to provide an answer, utilising data on households differentiated by their characteristics that affect their MPC. We have carried out a survey of 1014 Greek households/taxpayers that has produced a wealth of data on consumption, saving, and debt behaviour together with expectations on future activity, and behavioural characteristics. For a substantial portion of these households the information pertains to two periods: December 2019/January 2020 (well before there was wide public awareness in Greece about COVID-19), as well as the end of April 2020 (the peak of the health crisis so far in Greece).

The project includes three events, one of which has already taken place (details and materials below).  The other events are planned for later on this year:

  • Academic Workshop (Virtual event, with presentations by invitation and through a Call for Papers), 25th August 2022
  • Policymaker Round Table (Half day event with a round table discussion and presentations - format tbc), 23rd November 2022 

View the recording of the first workshop here.
Please see below for the full programme of the workshop:

Paper 1:

Household Spending Responses to the Economic Impact Payments of 2020: Evidence from the Consumer Expenditure Survey,
Jonathan Parker (MIT); Jake Schild (BLS); Laura Erhard (BLS); David Johnson (ISR University of Michigan)

Discussant: Claudia Sahm (SAHM Consulting)

Paper 2:

Heterogeneity in the Marginal Propensity to Consume Before and During the COVID-19 Pandemic: Evidence from a Lottery and Administrative Data,
Plutarchos Sakellaris (Athens University of Economics and Business); Christos Kotsogiannis (University of Exeter, TARC)

Discussant: Davide Melcangi (Federal Reserve Bank of New York)

Paper 3:

'The Marginal Propensity to Consume in Heterogeneous Agent Models'
Giovanni Violante (Princeton University) and Greg Kaplan (University of Chicago)

DiscussantXavier Mateos-Planas (Queen Mary University of London)

Paper 4:

'Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus Payments,' 
Scott Baker (Northwestern University); R.A. Farrokhnia (Columbia Business School); Steffen Meyer (University of Southern Denmark); Michaela Pagel (Columbia Business School); Constantine Yiannelis (University of Chicago Booth School of Business) 

Discussant:  Dimitris Georgarakos. (European Central Bank)