Working Paper: NBER ID: w14753
Authors: Matthew D. Shapiro; Joel B. Slemrod
Abstract: Only one-fifth of respondents to a rider on the University of Michigan Survey Research Center's Monthly Survey said that the 2008 tax rebates would lead them to mostly increase spending. Almost half said the rebate would mostly lead them to pay off debt, while about a third saying it would lead them mostly to save more. The survey responses imply that the aggregate propensity to spend from the rebate was about one-third, and that there would not be substantially more spending as a lagged effect of the rebates. Because of the low spending propensity, the rebates in 2008 provided low "bang for the buck" as economic stimulus. Putting cash into the hands of the consumers who use it to save or pay off debt boosts their well-being, but it does not necessarily make them spend. Low-income individuals were particularly likely to use the rebate to pay off debt.
Keywords: 2008 tax rebates; consumer spending; marginal propensity to consume
JEL Codes: E21; E62; E65; H31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 2008 tax rebates (H20) | consumer spending (D12) |
| rebate receipt (H20) | spending behavior (D12) |
| low marginal propensity to consume (MPC) (E21) | low effectiveness as economic stimulus (E65) |
| low-income individuals (I32) | use rebates to pay off debt (G51) |
| rebates (L42) | GDP growth (O49) |
| 2001 tax rebates (H20) | spending behavior (D12) |