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Did the 2008 Tax Rebates Stimulate Spending?

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  • Matthew D. Shapiro
  • Joel B. Slemrod

Abstract

Only one-fifth of respondents to a rider on the University of Michigan Survey Research Center's Monthly Survey said that the 2008 tax rebates would lead them to mostly increase spending. Almost half said the rebate would mostly lead them to pay off debt, while about a third saying it would lead them mostly to save more. The survey responses imply that the aggregate propensity to spend from the rebate was about one-third, and that there would not be substantially more spending as a lagged effect of the rebates. Because of the low spending propensity, the rebates in 2008 provided low "bang for the buck" as economic stimulus. Putting cash into the hands of the consumers who use it to save or pay off debt boosts their well-being, but it does not necessarily make them spend. Low-income individuals were particularly likely to use the rebate to pay off debt.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14753.

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Date of creation: Feb 2009
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Publication status: published as Matthew D. Shapiro & Joel Slemrod, 2009. "Did the 2008 Tax Rebates Stimulate Spending?," American Economic Review, American Economic Association, vol. 99(2), pages 374-79, May.
Handle: RePEc:nbr:nberwo:14753

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  1. Sumit Agarwal & Chunlin Liu & Nicholas S. Souleles, 2007. "The Reaction of Consumer Spending and Debt to Tax Rebates -- Evidence from Consumer Credit Data," NBER Working Papers 13694, National Bureau of Economic Research, Inc.
  2. David S. Johnson & Jonathan A. Parker & Nicholas S. Souleles, 2004. "Household Expenditure and the Income Tax Rebates of 2001," Working Papers 136, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
  3. Shapiro, Matthew D & Slemrod, Joel, 1995. "Consumer Response to the Timing of Income: Evidence from a Change in Tax Withholding," American Economic Review, American Economic Association, vol. 85(1), pages 274-83, March.
  4. Matthew D. Shapiro & Joel Slemrod, 2001. "Consumer Response to Tax Rebates," NBER Working Papers 8672, National Bureau of Economic Research, Inc.
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Cited by:
  1. Conley, Timothy G. & Dupor, Bill, 2013. "The American Recovery and Reinvestment Act: Solely a government jobs program?," Journal of Monetary Economics, Elsevier, vol. 60(5), pages 535-549.
  2. Mathias Dolls & Clemens Fuest & Andreas Peichl, 2010. "Automatic Stabilizers and Economic Crisis: US vs. Europe," Cologne Graduate School Working Paper Series 01-02, Cologne Graduate School in Management, Economics and Social Sciences.
  3. Susan Randolph & Patrick Guyer, 2011. "Tracking the Historical Evolution of States' Compliance with their Economics and Social Rights Obligations of Result: Insights from the Historical SERF Index," Economic Rights Working Papers 18, University of Connecticut, Human Rights Institute.
  4. Gathergood, John, 2012. "How do consumers respond to house price declines?," Economics Letters, Elsevier, vol. 115(2), pages 279-281.
  5. Alan J. Auerbach & William G. Gale, 2009. "Activist Fiscal Policy to Stabilize Economic Activity," NBER Working Papers 15407, National Bureau of Economic Research, Inc.
  6. Ryu-ichiro Murota & Yoshiyasu Ono, 2010. "A Reinterpretation of the Keynesian Consumption Function and Multiplier Effect," ISER Discussion Paper 0779, Institute of Social and Economic Research, Osaka University.
  7. Sagiri Kitao, 2010. "Short-run fiscal policy: welfare, redistribution, and aggregate effects in the short and long run," Staff Reports 442, Federal Reserve Bank of New York.
  8. John B. Taylor, 2011. "An Empirical Analysis of the Revival of Fiscal Activism in the 2000s," Discussion Papers 10-031, Stanford Institute for Economic Policy Research.
  9. Henning Bohn, 2011. "The Economic Consequences of Rising U.S. Government Debt: Privileges at Risk," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 67(3), pages 282-302, September.
  10. Diego E. Vacaflores, 2013. "Monetary Transfers in the U.S.: How Efficient Are Tax Rebates?," Economies, MDPI, Open Access Journal, vol. 1(3), pages 26-48, November.
  11. Klaus Schmidt-Hebbel, 2009. "Commentary: activist fiscal policy to stabilize economic activity," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 387-397.
  12. Ahrens, Steffen, 2009. "Fiscal responses to the financial crisis," Kiel Policy Brief 11, Kiel Institute for the World Economy (IfW).

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