Anticipation and Consumption

71 Pages Posted: 23 Feb 2021

See all articles by Neil Thakral

Neil Thakral

Brown University - Department of Economics

Linh Tô

Boston University - Department of Economics

Date Written: November 27, 2020

Abstract

This paper introduces a model of how the timing of information affects consumption decisions and tests its predictions in both developed and developing contexts. In our model, consumers form intertemporal plans and experience utility from anticipating future consumption. The model predicts excess sensitivity of spending to receiving a windfall, with smaller spending responses when there is more time to anticipate receiving the payment. The prediction that waiting leads to more patient decisions does not depend on whether consumers are liquidity constrained. Using Nielsen Consumer Panel data, we find higher marginal propensities to spend for households scheduled to receive the 2008 Economic Stimulus Payments sooner. Using data from randomized experiments in Kenya and Malawi, we find higher savings and assets among households scheduled to wait longer before receiving lump-sum unconditional cash transfers. Finally, we discuss existing evidence on how consumption responds to gains, losses, and news in light of our model.

Suggested Citation

Thakral, Neil and Tô, Linh, Anticipation and Consumption (November 27, 2020). Available at SSRN: https://ssrn.com/abstract=3756188 or http://dx.doi.org/10.2139/ssrn.3756188

Neil Thakral (Contact Author)

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

HOME PAGE: http://https://sites.google.com/brown.edu/nthakral/

Linh Tô

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States

HOME PAGE: http://linh.to/

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