Working Paper: NBER ID: w23920
Authors: Jonathan A. Parker; Nicholas S. Souleles
Abstract: We evaluate the consistency of two methods for estimating the effect of an economic policy: i) asking people how the policy caused them to change their behavior (reported effects); ii) inferring this change using data on behavior and differences in treatment across people (revealed-preference estimates). Both methods are widely used to measure spending caused by increases in liquidity. Using Federal stimulus payments disbursed quasi-randomly in 2008, we find larger revealed-preference estimates of spending propensities for households who report greater spending responses, and the methods produce similar average propensities. But evidence is mixed on the relationship between spending propensities and liquidity.
Keywords: spending behavior; economic policy; stimulus payments; revealed preference; reported preference
JEL Codes: B40; C42; D14; E21; E62; H31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| households who report spending their stimulus payments (D19) | significantly higher revealed preference estimates of spending (D11) |
| reported spending (H59) | reliable indicator of actual spending behavior (D12) |
| lower liquidity households (G59) | higher spending propensities (D12) |
| reported spending captures large differences in spending behavior (D12) | lack of correlation with liquidity raises questions about reliability of reported measures (G33) |