DP9530 Consumption, Income Changes and Heterogeneity: Evidence from Two Fiscal Stimulus Programmes

Author(s): Kanishka Misra, Paolo Surico
Publication Date: June 2013
Keyword(s): fiscal policy, heterogeneity, stimulus payments
JEL(s): D91, E21, E62, H31
Programme Areas: International Macroeconomics, Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9530

Almost half of American families did not adjust their consumption following receipt of the 2001 or 2008 tax rebates. Another 20%, with low income and more likely to rent, spent a small but significant amount. Households with large spending propensity held high mortgage debt. The heterogeneity is concentrated in a few non-durable categories and a handful of `new vehicle' purchases. The predictions of the heterogeneous response model appear far more accurate than their homogeneous response model counterparts, offering new insights on the evaluation of the two fiscal stimulus programmes.