Consumer Spending and the Economic Stimulus Payments of 2008

48 Pages Posted: 18 Jan 2011

See all articles by Jonathan A. Parker

Jonathan A. Parker

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Nicholas S. Souleles

University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER)

David Johnson

University of Michigan at Ann Arbor

David S. Johnson

Government of the United States of America - Bureau of the Census

Robert McClelland

Bureau of Labor Statistics

Date Written: January 2011

Abstract

We measure the response of household spending to the economic stimulus payments (ESPs) disbursed in mid-2008, using special questions added to the Consumer Expenditure Survey and variation arising from the randomized timing of when the payments were disbursed. We find that, on average, households spent about 12-30% (depending on the specification) of their stimulus payments on nondurable expenditures during the three-month period in which the payments were received. Further, there was also a substantial and significant increase in spending on durable goods, in particular vehicles, bringing the average total spending response to about 50-90% of the payments. Relative to research on the 2001 tax rebates, these spending responses are estimated with greater precision using the randomized timing variation. The estimated responses are substantial and significant for older, lower-income, and home-owning households. We find little evidence that the propensity to spend varies with the method of disbursement (paper check versus electronic transfer).

Suggested Citation

Parker, Jonathan A. and Souleles, Nicholas S. and Johnson, David and Johnson, David S. and McClelland, Robert, Consumer Spending and the Economic Stimulus Payments of 2008 (January 2011). NBER Working Paper No. w16684, Available at SSRN: https://ssrn.com/abstract=1740313

Jonathan A. Parker (Contact Author)

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Nicholas S. Souleles

University of Pennsylvania - Finance Department ( email )

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National Bureau of Economic Research (NBER)

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David Johnson

University of Michigan at Ann Arbor ( email )

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David S. Johnson

Government of the United States of America - Bureau of the Census

Robert McClelland

Bureau of Labor Statistics ( email )

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United States

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