Variation of Multiplier Effects of Consumption Vouchers Distributed in Different Ways

Abstract

Consumption voucher policy can stimulate aggregate demand. Some countries’ governments have responded to the recent world-wide recession with equal distribution consumption voucher policy. In this paper, consumption vouchers were distributed to two groups of people in two ways. Multiplier effects in two distribution ways were calculated, which shows that the marginal propensity to consume (MPC) of two groups and the proportion of each group’s disposable income are the main factors to influence the multiplier effect. By comparing the multiplier effects in two distribution ways, an equation was obtained as an optimization criterion of consumption voucher distribution. Government can choose the optimized way of consumption voucher distribution through this criterion on the basis of national conditions.