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This paper investigates the relationship between subjective uncertainty in earnings and the marginal propensity to consume (MPC) using data from the Survey of Consumer Expectations. The authors find that MPCs increase and are concave in relation to individual-specific earnings growth uncertainty, which contradicts traditional consumption-savings models that suggest MPCs decline with earnings uncertainty. The findings highlight the importance of latent heterogeneity and suggest that recent deviations from ra

Author

Pratham Luthra

Language

EN