Why Don't Households Smooth Consumption? Evidence from a 25 Million Dollar Experiment / Jonathan A. Parker.

Format:

Book

Author/Creator:

Parker, Jonathan A.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21369.

NBER working paper series no. w21369

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

This paper evaluates theoretical explanations for the propensity of households to increase spending in response to the arrival of predictable, lump-sum payments, using households in the Nielsen Consumer Panel who received 25 million in randomly-distributed stimulus payments. The pattern of spending is inconsistent with models in which identical households cycle rapidly through high and low response states as they manage liquidity, but is instead highly predictable by income years before the payment. Spending responses are unrelated to expectation errors, almost unrelated to crude measures of procrastination and self-control, significantly related to sophistication and planning, and highly related to impatience.

Notes:

Print version record

July 2015.