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Reported Effects vs. Revealed-Preference Estimates: Evidence from the propensity to spend tax rebates

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  • Jonathan A. Parker
  • Nicholas S. Souleles

Abstract

We evaluate the consistency of two methods for estimating the effect of an economic policy: i) asking people how the policy caused them to change their behavior (reported effects); ii) inferring this change using data on behavior and differences in treatment across people (revealed-preference estimates). Both methods are widely used to measure spending caused by increases in liquidity. Using Federal stimulus payments disbursed quasi-randomly in 2008, we find larger revealed-preference estimates of spending propensities for households who report greater spending responses, and the methods produce similar average propensities. But evidence is mixed on the relationship between spending propensities and liquidity.

Suggested Citation

  • Jonathan A. Parker & Nicholas S. Souleles, 2017. "Reported Effects vs. Revealed-Preference Estimates: Evidence from the propensity to spend tax rebates," NBER Working Papers 23920, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23920
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    Cited by:

    1. Tullio Jappelli & Luigi Pistaferri, 2020. "Reported MPC and Unobserved Heterogeneity," American Economic Journal: Economic Policy, American Economic Association, vol. 12(4), pages 275-297, November.
    2. Andreas Fagereng & Martin B. Holm & Gisle J. Natvik, 2021. "MPC Heterogeneity and Household Balance Sheets," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(4), pages 1-54, October.
    3. Koşar, Gizem & Melcangi, Davide & Pilossoph, Laura & Wiczer, David, 2023. "Stimulus through Insurance: The Marginal Propensity to Repay Debt," IZA Discussion Papers 16211, Institute of Labor Economics (IZA).
    4. Matthew Rognlie & Adrien Auclert, 2016. "Inequality and Aggregate Demand," 2016 Meeting Papers 1353, Society for Economic Dynamics.
    5. Campbell, J.R. & Hercowitz, Zvi, 2018. "Liquidity Constraints of the Middle Class (revision of CentER DP 2015-009)," Discussion Paper 2018-039, Tilburg University, Center for Economic Research.
    6. Tullio Jappelli & Luigi Pistaferri, 2020. "Permanent Income Shocks, Target Wealth, and the Wealth Gap," NBER Working Papers 27709, National Bureau of Economic Research, Inc.
    7. Assenza, Tiziana & Cardaci, Alberto & Delli Gatti, Domenico, 2019. "Perceived wealth, cognitive sophistication and behavioral inattention," IMFS Working Paper Series 135, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    8. Ezra Karger & Aastha Rajan, 2020. "Heterogeneity in the Marginal Propensity to Consume: Evidence from Covid-19 Stimulus Payments," Working Paper Series WP-2020-15, Federal Reserve Bank of Chicago, revised 21 Feb 2021.
    9. Gallagher, Emily A. & Gopalan, Radhakrishnan & Grinstein-Weiss, Michal & Sabat, Jorge, 2020. "Medicaid and household savings behavior: New evidence from tax refunds," Journal of Financial Economics, Elsevier, vol. 136(2), pages 523-546.
    10. Assenza, Tiziana & Cardaci, Alberto & Delli Gatti, Dominico, 2021. "The Leverage Self-Delusion: Perceived Wealth and Cognitive Sophistication," TSE Working Papers 19-1055, Toulouse School of Economics (TSE).
    11. Scott R. Baker & Lorenz Kueng & Steffen Meyer & Michaela Pagel, 2018. "Measurement Error in Imputed Consumption," NBER Working Papers 25078, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • 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
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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