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Taxation and Consumption: Evidence from a Representative Survey of the German Population

  • Bernd Hayo

    ()

    (University of Marburg)

  • Matthias Uhl

    ()

    (University of Marburg)

Using a representative survey of the German population, this paper studies individual consumption responses to a recent payroll tax reduction. Our results show that 55% of the respondents spend the extra money, indicating considerable potential for tax changes to affect consumption and economic activity. Our analysis of the socio-demographic and economic determinants of consumption responses suggests that temporary and permanent tax changes have a similar impact, that interest rates are an important determinant of consumption responses to tax changes, and that households with higher income have a higher propensity to consume.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/20-2014_hayo.pdf
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Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201420.

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Length: 21 pages
Date of creation: 2014
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:201420
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Web page: http://www.uni-marburg.de/fb02/
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