Winners, Losers, and Near-Rationality: Heterogeneity in the MPC out of a Large Stimulus Tax Rebate

RIETI Discussion Paper, No. 20-E-067.

60 Pages Posted: 24 Sep 2020

See all articles by Cameron LaPoint

Cameron LaPoint

Yale School of Management

Takashi Unayama

Hitotsubashi University

Date Written: August 19, 2020

Abstract

We document heterogeneous spending out of a large stimulus tax rebate by household exposure to the 1980s Japanese housing market turbulence. We find recipients in areas with mild housing booms during the 1980s spent 47% of the 1994 tax rebate within a quarter, compared to 24% in areas with the largest booms. MPCs are highest for young renters without debt. Our findings are consistent with near-rationality rather than a liquidity constraint story. Winners who are less exposed to housing risk respond more to payments, implying policies which target losers from housing market downturns may be less effective at stimulating consumption.

Keywords: fiscal stimulus, tax rebate, marginal propensity to consume, near-rationality, housing price cycles, liquidity constraints

JEL Classification: D14, E21, E62, H31, R31

Suggested Citation

LaPoint, Cameron and Unayama, Takashi, Winners, Losers, and Near-Rationality: Heterogeneity in the MPC out of a Large Stimulus Tax Rebate (August 19, 2020). RIETI Discussion Paper, No. 20-E-067., Available at SSRN: https://ssrn.com/abstract=3677483 or http://dx.doi.org/10.2139/ssrn.3677483

Cameron LaPoint (Contact Author)

Yale School of Management ( email )

165 Whitney Ave
P.O. Box 208200
New Haven, CT 06511
United States

HOME PAGE: http://https://som.yale.edu/faculty/cameron-lapoint

Takashi Unayama

Hitotsubashi University ( email )

Tokyo, 186-8601
Japan

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