Liquidity and Consumption: Evidence from three post-earthquakes reconstruction programs in Italy
Accepted version
Peer-reviewed
Repository URI
Repository DOI
Change log
Authors
Abstract
In Italian regions hit by earthquakes homeowners typically receive public funds to finance reconstruction. While these funds are strictly tied to reconstruction work, they are in part disbursed upfront, leading to significant variation in cash-on-hand. We exploit this variation to study the effects of liquidity on relatively wealthy households’ consumption. We find a large and significant response in the first year homeowners receive the cash, and provide evidence that this response is driven by illiquid households with bank debt. Instead, we find no evidence that consumption responds to funds paid directly to firms, thus leaving households’ liquidity unaffected.
Description
Keywords
38 Economics, 3801 Applied Economics
Journal Title
American Economic Journal: Macroeconomics
Conference Name
Journal ISSN
1945-7715
1945-7715
1945-7715
Volume Title
12
Publisher
American Economic Association
Publisher DOI
Rights
All rights reserved