Discussion paper

DP17872 The Trickling Up of Excess Savings

We provide a simple framework connecting the distribution of excess savings across house- holds to the dynamics of aggregate demand. Deficit-financed fiscal transfers generate excess savings. The poorest households with the highest MPCs spend down their excess savings the fastest, increasing other households’ incomes and their excess savings. This leads to a long- lasting increase in aggregate demand until, ultimately, excess savings have “trickled up” to the richest savers with the lowest MPCs, raising wealth inequality.


Auclert, A, M Rognlie and L Straub (2023), ‘DP17872 The Trickling Up of Excess Savings‘, CEPR Discussion Paper No. 17872. CEPR Press, Paris & London. https://cepr.org/publications/dp17872