Working Paper: Spending when illiquid savings become liquid: Evidence from Danish wage earners
Working Paper - September 2020 - No. 161
This paper offers new empirical evidence on the marginal propensity to consume out of an unanticipated liquidity shock. The results show a 43 dollar spending increase for each 100 dollar increase in liquid resources. The estimated spending patterns are consistent with the notion of wealthy hand-to-mouth behaviour.