https://macropaperwarehouse.com/authors/laura-pilossoph/Laura PilossophHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/latent-heterogeneity-in-the-marginal-propensity-to-consume/https://macropaperwarehouse.com/papers/latent-heterogeneity-in-the-marginal-propensity-to-consume/<p>Lewis, Melcangi, and Pilossoph estimate the unconditional distribution of the marginal propensity to consume (MPC) using the 2008 Economic Stimulus Act (ESA) rebate payments, deploying Gaussian mixture linear regression (GMLR) — a clustering regression approach — rather than the standard practice of interacting the rebate with observable household characteristics. The key methodological departure is that households are assigned to groups not by any presupposed observable, but by how well estimated group-specific MPCs describe each household&rsquo;s actual consumption response; this allows recovery of the full unconditional MPC distribution, including heterogeneity driven by latent (unobservable) factors.</p>