Household Spending Out of a Tax Rebate: Italian '€80 Tax Bonus'

51 Pages Posted: 4 Oct 2017

Multiple version iconThere are 2 versions of this paper

Date Written: June 15, 2017

Abstract

We estimate the consumption response of Italian households to the “€80 tax bonus” introduced in 2014, using the panel component on the Survey of Household Income and Wealth. We find that households that received the tax rebate increased their monthly consumption of food and means of transportation by about €20 and €30, respectively, about 50-60 per cent of the total bonus. There was a larger increase for households with low liquid wealth or low income. Our estimates are quite robust to different model specifications and are broadly in line with the evidence available from similar tax rebates in other countries but, due to the small sample size, are not always statistically significant. To understand the mechanism behind our results we then simulate an overlapping generations model of household consumption: the marginal propensity to consume generated by the structural model is in line with our empirical estimates.

Keywords: Fiscal Stimulus, Marginal Propensity to Consume, Consumer Behaviour

JEL Classification: D12, E21

Suggested Citation

Neri, Andrea and Rondinelli, Concetta and Scoccianti, Filippo, Household Spending Out of a Tax Rebate: Italian '€80 Tax Bonus' (June 15, 2017). Bank of Italy Occasional Paper No. 379. Available at SSRN: https://ssrn.com/abstract=3047180 or http://dx.doi.org/10.2139/ssrn.3047180

Andrea Neri

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Concetta Rondinelli (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Filippo Scoccianti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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