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Ricardian or Spender Consumers? Evidence from a Taxpayer Survey Questionnaire

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  • Échevin, Damien

Abstract

This paper uses a unique survey questionnaire to assess the impact of the 2002 French tax cut on consumption. I find that the proportion of "spender" consumers as opposed to "Ricardian" consumers is relatively high, with 52.7 per cent of the households declaring that they consume their tax cuts. I also find evidence that the average marginal propensity to consume tax cuts (76.5%) is significantly greater than the average marginal propensity to consume temporary rises in earnings (42.4%). This result is consistent with the PIH. Furthermore, the smaller the tax cut, the greater this gap; and the higher the family earnings, the higher the marginal propensity to consume tax cuts, which invalidates the effect of liquidity constraints on consumption in that context.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19496.

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Date of creation: 18 Dec 2009
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Handle: RePEc:pra:mprapa:19496

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Keywords: income tax cut; consumption; survey questionnaire; PIH; liquidity constraints.;

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  1. Matthew D. Shapiro & Joel Slemrod, 2003. "Did the 2001 Tax Rebate Stimulate Spending? Evidence from Taxpayer Surveys," NBER Chapters, in: Tax Policy and the Economy, Volume 17, pages 83-110 National Bureau of Economic Research, Inc.
  2. Matthew D. Shapiro & Joel Slemrod, 1993. "Consumer Response to the Timing of Income: Evidence from a Change in Tax Withholding," NBER Working Papers 4344, National Bureau of Economic Research, Inc.
  3. Matthew D. Shapiro & Joel Slemrod, 2001. "Consumer Response to Tax Rebates," NBER Working Papers 8672, National Bureau of Economic Research, Inc.
  4. N. Gregory Mankiw, 2000. "The Savers-Spenders Theory of Fiscal Policy," NBER Working Papers 7571, National Bureau of Economic Research, Inc.
  5. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  6. Souleles, Nicholas S., 2002. "Consumer response to the Reagan tax cuts," Journal of Public Economics, Elsevier, Elsevier, vol. 85(1), pages 99-120, July.
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