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Heterogeneous Consumers, Credit Rationing, and Tax-Benefit Policies

  • Willem L. HeeringaEmail author
  • Job Swank
Article
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Abstract

We examine the effects of redistribution policies on consumption. Unlike other studies in the field, our model does not start from risk-averse preferences. Instead, we focus on the interaction between heterogeneous households, characterized by the income shocks they face, and banks that maximize expected profits by controlling credit supply at given loan and deposit rates. All household types (savers, rule-of-thumb consumers, constrained and unconstrained borrowers) normally coexist and respond endogenously to changes in the economic environment. We find that tax-benefit policies—if properly designed—can boost current aggregate consumption, although their marginal effectiveness may diminish quite rapidly.

Keywords

Heterogeneous households Rule-of-thumb consumption Credit rationing Fiscal policy 

JEL Classification

E21 E62 H31 

Notes

Acknowledgement

We would like to thank the anonymous referee for useful comments.

Supplementary material

10645_2019_9337_MOESM1_ESM.pdf (620 kb)
Supplementary material 1 (PDF 621 kb)

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.De Nederlandsche BankAmsterdamThe Netherlands
  2. 2.Erasmus University RotterdamRotterdamThe Netherlands

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