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Did the 2008 Tax Rebates Stimulate Spending?

14 Pages Posted: 26 Feb 2009 Last revised: 19 Mar 2010

Matthew D. Shapiro

University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Date Written: February 2009

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.

Suggested Citation

Shapiro, Matthew D. and Slemrod, Joel B., Did the 2008 Tax Rebates Stimulate Spending? (February 2009). NBER Working Paper No. w14753. Available at SSRN: https://ssrn.com/abstract=1349586

Matthew Shapiro (Contact Author)

National Bureau of Economic Research (NBER) ( email )

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University of Michigan at Ann Arbor - Department of Economics ( email )

and Survey Research Center
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Ann Arbor, MI 48109-1220
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313-764-5419 (Phone)
313-764-2769 (Fax)

Joel Slemrod

University of Michigan, Stephen M. Ross School of Business ( email )

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Room R5396
Ann Arbor, MI 48109-1234
United States
734-936-3914 (Phone)
734-763-4032 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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