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Check in the Mail or More in the Paycheck: Does the Effectiveness of Fiscal Stimulus Depend on How It Is Delivered?

Author

Listed:
  • Claudia R. Sahm
  • Matthew D. Shapiro
  • Joel Slemrod

Abstract

Recent fiscal policies, including the 2008 stimulus payments and the 2009 Making Work Pay Tax Credit, aimed to increase household spending. This paper quantifies the spending response to these policies and examines differences in spending by whether the stimulus was delivered as a one-time payment or as a flow of payments from reduced withholding. Based on responses from a representative sample of households in the Thomson Reuters/University of Michigan Surveys of Consumers, the paper finds that the reduction in withholding in 2009 boosted spending at roughly half the rate (13 percent) as the one-time payments (25 percent) in 2008. (JEL D12, E21, E62)

Suggested Citation

  • Claudia R. Sahm & Matthew D. Shapiro & Joel Slemrod, 2012. "Check in the Mail or More in the Paycheck: Does the Effectiveness of Fiscal Stimulus Depend on How It Is Delivered?," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 216-250, August.
    • Handle: RePEc:aea:aejpol:v:4:y:2012:i:3:p:216-50
    Note: DOI: 10.1257/pol.4.3.216
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    References listed on IDEAS

    as
    1. Jonathan A. Parker, 1999. "The Reaction of Household Consumption to Predictable Changes in Social Security Taxes," American Economic Review, American Economic Association, vol. 89(4), pages 959-973, September.
    2. Matthew D. Shapiro & Joel Slemrod, 2009. "Did the 2008 Tax Rebates Stimulate Spending?," American Economic Review, American Economic Association, vol. 99(2), pages 374-379, May.
    3. Jonathan A. Parker & Nicholas S. Souleles & David S. Johnson & Robert McClelland, 2013. "Consumer Spending and the Economic Stimulus Payments of 2008," American Economic Review, American Economic Association, vol. 103(6), pages 2530-2553, October.
    4. Nicholas S. Souleles & Jonathan A. Parker & David S. Johnson, 2006. "Household Expenditure and the Income Tax Rebates of 2001," American Economic Review, American Economic Association, vol. 96(5), pages 1589-1610, December.
    5. 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.
    6. Claudia R. Sahm & Matthew D. Shapiro & Joel Slemrod, 2010. "Household Response to the 2008 Tax Rebate: Survey Evidence and Aggregate Implications," NBER Chapters, in: Tax Policy and the Economy, Volume 24, pages 69-110, National Bureau of Economic Research, Inc.
    7. Chambers, Valrie & Spencer, Marilyn, 2008. "Does changing the timing of a yearly individual tax refund change the amount spent vs. saved?," Journal of Economic Psychology, Elsevier, vol. 29(6), pages 856-862, December.
    8. 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.
    9. Claudia R. Sahm & Matthew D. Shapiro & Joel Slemrod, 2012. "Check in the Mail or More in the Paycheck: Does the Effectiveness of Fiscal Stimulus Depend on How It Is Delivered?," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 216-250, August.
    10. Souleles, Nicholas S., 2000. "College tuition and household savings and consumption," Journal of Public Economics, Elsevier, vol. 77(2), pages 185-207, August.
    11. Damon Jones, 2012. "Inertia and Overwithholding: Explaining the Prevalence of Income Tax Refunds," American Economic Journal: Economic Policy, American Economic Association, vol. 4(1), pages 158-185, February.
    12. 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

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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    1. Check in the Mail or More in the Paycheck: Does the Effectiveness of Fiscal Stimulus Depend on How It Is Delivered? (American Economic Journal: Economic Policy 2012) in ReplicationWiki

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