Balance-Sheet Households and Fiscal Stimulus: Lessons from the Payroll Tax Cut and Its Expiration / Claudia R. Sahm, Matthew D. Shapiro, Joel Slemrod.

Format:

Book

Author/Creator:

Sahm, Claudia R.

Contributor:

National Bureau of Economic Research.

Shapiro, Matthew D.

Slemrod, Joel.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21220.

NBER working paper series no. w21220

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Balance-Sheet Households and Fiscal Stimulus

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

Balance-sheet repair drove the response of a significant fraction of households to fiscal stimulus following the Great Recession. By combining survey, behavioral, and time-series evidence on the 2011 payroll tax cut and its expiration in 2013, this papers identifies and analyzes households who smooth debt repayment. These "balance-sheet households" are as prevalent as "permanent-income households," who smooth consumption in response to the temporary tax cut, and outnumber "constrained households," who temporarily boost spending. The asymmetric spending response of balance-sheet households poses challenges to standard models, but nonetheless appears important for understanding individual and aggregate responses to fiscal stimulus.

Notes:

Print version record

May 2015.