Download This PaperAsymmetric Consumption Smoothing
Fisher College of Business Working Paper No. 2013-03-20
Charles A. Dice Center Working Paper No. 2013-20
64 Pages Posted: 22 Dec 2013 Last revised: 13 Jul 2020
Date Written: July 8, 2020
Abstract
Analyzing account-level data from an account aggregator, we find that households increase consumption when they receive (expected) tax refunds, as if they face liquidity constraints. However, these same households smooth consumption when making payments in other years, primarily by transferring funds among liquid accounts. Even households carrying credit card debt smooth consumption when making payments, and even highly-liquid households spend out of refunds. This behavior is inconsistent with pure liquidity constraints or hand-to-mouth behavior and most consistent with a mental accounting life-cycle model.
Keywords: Consumption, household finance, liquidity constraints, hand-to-mouth, mental accounting, tax refunds
JEL Classification: G4, D12, E21, H31
Suggested Citation: Suggested Citation
Itzhak Ben-David (Contact Author)
Ohio State University (OSU) - Department of Finance ( email )
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HOME PAGE: http://https://u.osu.edu/ben-david.1/
Jonathan A. Parker
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
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