Reported Effects vs. Revealed-Preference Estimates: Evidence from the Propensity to Spend Tax Rebates

23 Pages Posted: 16 Oct 2017

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)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2017

Abstract

We evaluate the consistency of two methods for estimating the effect of an economic policy: i) asking people how the policy caused them to change their behavior (reported effects); ii) inferring this change using data on behavior and differences in treatment across people (revealed-preference estimates). Both methods are widely used to measure spending caused by increases in liquidity. Using Federal stimulus payments disbursed quasi-randomly in 2008, we find larger revealed-preference estimates of spending propensities for households who report greater spending responses, and the methods produce similar average propensities. But evidence is mixed on the relationship between spending propensities and liquidity.

Suggested Citation

Parker, Jonathan A. and Souleles, Nicholas S., Reported Effects vs. Revealed-Preference Estimates: Evidence from the Propensity to Spend Tax Rebates (October 2017). NBER Working Paper No. w23920. Available at SSRN: https://ssrn.com/abstract=3053670

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