How true is the old adage “easy come, easy go”? More formally, is it fair to suggest that an individual’s marginal propensity to consume (MPC) — the share of an extra dollar of income that they would spend on consumption rather than save — depends on the origin of the income? The traditional wisdom would suggest that:
MPC (fortuitous income) > MPC (hard-earned income)
Have there been any studies on this? If so, have there been any studies that apply the results to the evolution of US inequality in income and consumption?
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