Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/254243
Year of Publication: 
2022
Series/Report no.: 
MAGKS Joint Discussion Paper Series in Economics No. 07-2022
Publisher: 
Philipps-University Marburg, School of Business and Economics, Marburg
Abstract: 
In evaluating surveys conducted in Thailand and Vietnam during the COVID-19 pandemic, we find that the marginal propensity to consume is significantly larger for positive than for negative income shocks. This result contradicts a prediction from the lifecycle permanent income model with borrowing constraints as well as empirical evidence from industrialized countries. However, our finding is consistent with Kahneman and Tversky's prospect theory, according to which the combination of income uncertainty and loss aversion can induce households to react more strongly to positive than to negative shocks.
Subjects: 
Marginal propensity to consume (MPC)
Unanticipated income shocks
COVID-19
Thailand
Vietnam
JEL: 
E62
E71
D12
D83
H31
Document Type: 
Working Paper

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