Working Paper: NBER ID: w15421
Authors: Claudia R. Sahm; Matthew D. Shapiro; Joel B. Slemrod
Abstract: Only about one-fifth of respondents in the Reuters/University of Michigan survey report that the 2008 tax rebates led them to mostly increase spending, while over half said it would lead them to mostly pay off debt. Of those in the mostly-spend category, the response was swift, with over 80 percent reporting increasing their spending within three months of receiving their rebate. Older households, households with higher wealth and higher income, and those expecting future income growth were generally more likely to spend the rebates. A review of other surveys confirms the general pattern of results and suggests that small changes in survey design do not have a major effect on the distribution of responses. \n \nThe distribution of survey answers corresponds to an aggregate MPC after one year of about one-third. The paper combines this survey-based estimate of the MPC and the survey-based estimate of the timing of spending to show that the rebates help explain the aggregate movements in saving, spending, and debt in 2008. Because the rebate was large and distributed over a short period, it had a non-trivial effect on total spending in the second and third quarters of 2008. Nonetheless, the results imply that the rebates provided only a modest stimulus to spending per dollar of rebate.
Keywords: Tax Rebate; Consumer Spending; Fiscal Stimulus
JEL Codes: C83; E21; E63; 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) | increased household spending (D19) |
| 2008 tax rebates (H20) | decreased household debt (G51) |
| 2008 tax rebates (H20) | immediate increase in spending within three months (E62) |
| 2008 tax rebates (H20) | changes in consumption patterns (D12) |
| timing and amount of rebates (H23) | measurable impact on consumer spending behavior (D12) |
| older households, higher wealth and income, future income growth expectations (G51) | increased likelihood to spend rebates (H23) |
| 2008 tax rebates (H20) | modest increase in overall spending (H61) |
| 2008 tax rebates (H20) | did not prevent economic downturn (N14) |