Gene Amromin, Mariacristina De Nardi, Karl Schulze, 04 January 2018

A widening gap between rich and poor has been extensively documented for many countries and economies. This column explores how the wealth gap affects output and consumption changes in response to aggregate shocks. Lower- and higher-wealth households face different borrowing constraints, and have different marginal propensities to consume. Different levels of access to financial liquidity thus play a major role in the overall consumption dynamics during an economic downturn.

Antonio Acconcia, Giancarlo Corsetti, Saverio Simonelli, 14 August 2015

Fiscal transfers are successful in stimulating aggregate demand to the extent that they reach households with a high marginal propensity to consume. Using micro evidence from Italian earthquakes, this column argues that a well-designed programme of temporary transfers, targeted to relatively wealthy but possibly illiquid households, can be quite helpful in speeding up recovery.