Taxation and Consumption: Evidence from a Representative Survey of the German Population
MAGKS Discussion Papers, No. 20-2014
22 Pages Posted: 25 Jan 2016
Date Written: July 2014
Using a representative survey of the German population, this paper studies self-reported individual consumption responses to a recent payroll tax reduction. About 55 percent of the respondents report that they spend the extra money, indicating considerable potential for tax changes to affect consumption and economic activity. Our analysis of the socio-demographic and economic covariates of consumption responses suggests, among other effects, that interest rates are related to consumption responses to tax changes, and that households with higher income have a higher propensity to consume.
Keywords: Taxation, Consumption, Representative population survey, Germany
JEL Classification: E21, E62, H30
Suggested Citation: Suggested Citation