Revisiting the Response of Household Spending to the Alaska Permanent Fund Dividend Using CE Data

23 Pages Posted: 22 Jul 2015 Last revised: 6 Aug 2015

See all articles by Lorenz Kueng

Lorenz Kueng

University of Lugano - Faculty of Economics; Swiss Finance Institute; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Northwestern University - Kellogg School of Management

Date Written: July 21, 2015

Abstract

This paper revisits the important contribution of Hsieh (2003) to the analysis of the intertemporal allocation of household consumption. Using total expenditures to normalize income from the Alaska Permanent Fund Dividend instead of family income and an extended sample of the Consumer Expenditure Survey (CE), I show that log household spending on nondurables is excessively sensitive to the arrival of this predetermined cash flow, with a statistically significant elasticity between 11% and 16%. The previously estimated non-response can largely be attributed to attenuation bias introduced by substantial measurement error in self-reported before-tax family income, in particular over-reporting of very small values.

Keywords: household spending, excess sensitivity, Alaska Permanent Fund Dividend

JEL Classification: D12, D91, E21, H31

Suggested Citation

Kueng, Lorenz, Revisiting the Response of Household Spending to the Alaska Permanent Fund Dividend Using CE Data (July 21, 2015). Available at SSRN: https://ssrn.com/abstract=2634005 or http://dx.doi.org/10.2139/ssrn.2634005

Lorenz Kueng (Contact Author)

University of Lugano - Faculty of Economics

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Swiss Finance Institute

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Northwestern University - Kellogg School of Management

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