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Ricardian or Spender Consumers? Evidence from a Taxpayer Survey Questionnaire

Author

Listed:
  • Damien Échevin

    (Université de Sherbrooke)

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.

Suggested Citation

  • Damien Échevin, 2010. "Ricardian or Spender Consumers? Evidence from a Taxpayer Survey Questionnaire," Economics Bulletin, AccessEcon, vol. 30(2), pages 1526-1538.
    • Handle: RePEc:ebl:ecbull:eb-09-00788
    as

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    References listed on IDEAS

    as
    1. N. Gregory Mankiw, 2000. "The Savers-Spenders Theory of Fiscal Policy," American Economic Review, American Economic Association, vol. 90(2), pages 120-125, May.
    2. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    3. Matthew D. Shapiro & Joel Slemrod, 2003. "Consumer Response to Tax Rebates," American Economic Review, American Economic Association, vol. 93(1), pages 381-396, March.
    4. 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.
    5. 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 274-283, March.
    6. Souleles, Nicholas S., 2002. "Consumer response to the Reagan tax cuts," Journal of Public Economics, Elsevier, vol. 85(1), pages 99-120, July.
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    More about this item

    Keywords

    income tax cut; consumption; survey questionnaire; PIH; liquidity constraints;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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