IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v38y2006i20p2371-2379.html
   My bibliography  Save this article

Source of income effects for demand decisions and taxable consumption

Author

Listed:
  • Richard Hawkins
  • Sally Wallace

Abstract

The relationship between sources of income and demand decisions by the household is examined here with an eye toward the ramifications on consumption tax bases. Income sources may be important when households attach psychic and transaction costs to individual purchases or when sources are assigned via a mental accounting process. In either case, general and specific sales tax bases may be affected by changes in income composition. Empirical results indicate two important findings. First, tax exemptions can introduce significant income source effects for a general consumption tax base. Second, the importance of differential tax rates for gasoline and food-at-home strongly depends on the mix of labour, capital, retirement and non-retirement transfer pay.

Suggested Citation

  • Richard Hawkins & Sally Wallace, 2006. "Source of income effects for demand decisions and taxable consumption," Applied Economics, Taylor & Francis Journals, vol. 38(20), pages 2371-2379.
    • Handle: RePEc:taf:applec:v:38:y:2006:i:20:p:2371-2379
    DOI: 10.1080/00036840500427528
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840500427528
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036840500427528?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Russell Sobel & S. Travis Raines, 2003. "An examination of the empirical derivatives of the favourite-longshot bias in racetrack betting," Applied Economics, Taylor & Francis Journals, vol. 35(4), pages 371-385.
    2. Lester D. Taylor, 1971. "Saving out of Different Types of Income," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 383-416.
    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. Barrow, Lisa & McGranahan, Leslie, 2000. "The Effects of the Earned Income Credit on the Seasonality of Household Expenditures," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 1211-44, December.
    5. Bruno Heyndels, 2001. "Asymmetries in the flypaper effect: empirical evidence for the Flemish municipalities," Applied Economics, Taylor & Francis Journals, vol. 33(10), pages 1329-1334.
    6. Hawkins, Richard R., 2002. "Popular Substitution Effects: Excess Burden Estimates for General Sales Taxes," National Tax Journal, National Tax Association;National Tax Journal, vol. 55(4), pages 755-770, December.
    7. Aled ab Iorwerth & John Whalley, 2002. "Efficiency considerations and the exemption of food from sales and value added taxes," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 35(1), pages 166-182, February.
    8. Barrow, Lisa & McGranahan, Leslie, 2000. "The Effects of the Earned Income Credit on the Seasonality of Household Expenditures," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(4), pages 1211-1244, December.
    9. Daniel R. Mullins & Sally Wallace, 1996. "Changing Demographics and State Fiscal Outlook: the Case of Sales Taxes," Public Finance Review, , vol. 24(2), pages 237-262, April.
    10. Daniela Del Boca & Christopher J. Flinn, 1994. "Expenditure Decisions of Divorced Mothers and Income Composition," Journal of Human Resources, University of Wisconsin Press, vol. 29(3), pages 742-761.
    11. Lester D. Taylor, 1971. "Saving out of Different Types of Income," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 2(2), pages 383-415.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. de Bondt, Gabe & Gieseck, Arne & Zekaite, Zivile & Herrero, Pablo, 2019. "Disaggregate income and wealth effects in the largest euro area countries," Working Paper Series 2343, European Central Bank.
    2. Andrew V. Stephenson & Amanda Wilsker, 2016. "Consumption Effects of Foreign Remittances in Jamaica," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 22(3), pages 309-320, August.
    3. Dimitrios Sideris & Georgia Pavlou, 2021. "Disaggregate income and wealth effects on private consumption in Greece," Working Papers 293, Bank of Greece.
    4. Gabe de Bondt & Arne Gieseck & Pablo Herrero & Zivile Zekaite, 2021. "Euro Area Income and Wealth Effects: Aggregation Issues," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(6), pages 1454-1474, December.
    5. Shankar Ghimire & Kul Prasad Kapri, 2020. "Does the Source of Remittance Matter? Differentiated Effects of Earned and Unearned Remittances on Agricultural Productivity," Economies, MDPI, vol. 8(1), pages 1-15, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sumit Agarwal & Dan Aaronson & Eric French, 2008. "The Consumption Response to Minimum Wage Hikes," 2008 Meeting Papers 379, Society for Economic Dynamics.
    2. Daniel Aaronson & Sumit Agarwal & Eric French, 2008. "The consumption response to minimum wage increases," Working Paper Series WP-07-23, Federal Reserve Bank of Chicago.
    3. Can Cui, 2017. "Cash-on-hand and demand for credit," Empirical Economics, Springer, vol. 52(3), pages 1007-1039, May.
    4. Gordon B. Dahl & Lance Lochner, 2012. "The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit," American Economic Review, American Economic Association, vol. 102(5), pages 1927-1956, August.
    5. 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.
    6. Paradiso, Antonio & Casadio, Paolo & Rao, B. Bhaskara, 2012. "US inflation and consumption: A long-term perspective with a level shift," Economic Modelling, Elsevier, vol. 29(5), pages 1837-1849.
    7. J. Michael Collins & Amrita Kulka, 2023. "Saving by buying ahead: stockpiling in response to lump‐sum payments," Fiscal Studies, John Wiley & Sons, vol. 44(4), pages 451-484, December.
    8. Neil Bania & Laura Leete, 2009. "Monthly household income volatility in the U.S., 1991/92 vs. 2002/03," Economics Bulletin, AccessEcon, vol. 29(3), pages 2100-2112.
    9. Wang, Julia Shu-Huah & Zhang, Jinbao & Fu, Tsung-Hsi, 2021. "The effects of universal child allowance on family expenditure in Taiwan," Children and Youth Services Review, Elsevier, vol. 129(C).
    10. Sondra Beverly & Daniel Schneider & Peter Tufano, 2006. "Splitting Tax Refunds and Building Savings: An Empirical Test," NBER Chapters, in: Tax Policy and the Economy, Volume 20, pages 111-162, National Bureau of Economic Research, Inc.
    11. Jesus Fernández-Villaverde & Dirk Krueger, 2007. "Consumption over the Life Cycle: Facts from Consumer Expenditure Survey Data," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 552-565, August.
    12. Hilary Hoynes & Doug Miller & David Simon, 2015. "Income, the Earned Income Tax Credit, and Infant Health," American Economic Journal: Economic Policy, American Economic Association, vol. 7(1), pages 172-211, February.
    13. Ben S. Bernanke, 1984. "Permanent Income, Liquidity, and Expenditure on Automobiles: Evidence from Panel Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(3), pages 587-614.
    14. Austin Nichols & Jesse Rothstein, 2015. "The Earned Income Tax Credit," NBER Chapters, in: Economics of Means-Tested Transfer Programs in the United States, Volume 1, pages 137-218, National Bureau of Economic Research, Inc.
    15. Blake, David, 2002. "The impact of wealth on consumption and retirement behaviour in the UK," LSE Research Online Documents on Economics 24949, London School of Economics and Political Science, LSE Library.
    16. Lauren E. Jones & Kevin Milligan & Mark Stabile, 2019. "Child cash benefits and family expenditures: Evidence from the National Child Benefit," Canadian Journal of Economics, Canadian Economics Association, vol. 52(4), pages 1433-1463, November.
    17. Randjelovic, Sasa, 2013. "Effects of income tax on personal savings: econometric evidence from Serbia," EUROMOD Working Papers EM1/13, EUROMOD at the Institute for Social and Economic Research.
    18. David Neumark & Katherine E. Williams, 2020. "Do State Earned Income Tax Credits Increase Participation in the Federal EITC?," Public Finance Review, , vol. 48(5), pages 579-626, September.
    19. Laura Leete & Neil Bania, 2010. "The effect of income shocks on food insufficiency," Review of Economics of the Household, Springer, vol. 8(4), pages 505-526, December.
    20. Mike Brewer, 2001. "Comparing in-work benefits and the reward to work for families with children in the US and the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 22(1), pages 41-77, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:38:y:2006:i:20:p:2371-2379. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.