Asymmetric Consumption Smoothing

64 Pages Posted: 24 Sep 2018 Last revised: 19 Jul 2023

See all articles by Brian Baugh

Brian Baugh

University of Nebraska at Lincoln

Itzhak Ben-David

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

Hoonsuk Park

University of Melbourne - Faculty of Business and Economics

Jonathan A. Parker

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Date Written: September 2018

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.

Suggested Citation

Baugh, Brian and Ben-David, Itzhak and Park, Hoonsuk and Parker, Jonathan A., Asymmetric Consumption Smoothing (September 2018). NBER Working Paper No. w25086, Available at SSRN: https://ssrn.com/abstract=3254080

Brian Baugh (Contact Author)

University of Nebraska at Lincoln ( email )

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United States

Itzhak Ben-David

Ohio State University (OSU) - Department of Finance ( email )

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HOME PAGE: http://https://u.osu.edu/ben-david.1/

National Bureau of Economic Research (NBER) ( email )

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HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/

Hoonsuk Park

University of Melbourne - Faculty of Business and Economics ( email )

Victoria, 3010
Australia

Jonathan A. Parker

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA
United States
617-253-7218 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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