TY  - JOUR
AU  - Johnson,David S.
AU  - Parker,Jonathan A.
AU  - Souleles,Nicholas S.
TI  - Household Expenditure and the Income Tax Rebates of 2001
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10784
PY  - 2004
Y2  - September 2004
UR  - http://www.nber.org/papers/w10784
L1  - http://www.nber.org/papers/w10784.pdf
N1  - Author contact info:
David Johnson
US Census Bureau
Room 7H174
Washington, DC 20233-8500
Tel: 301-763-6443
Fax: 301-763-3232
E-Mail: david.s.johnson@census.gov

Jonathan Parker
Finance Department
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL  60208-2001
Tel: 847/491-4113
Fax: 847/491-5719
E-Mail: Jonathan-Parker@Kellogg.Northwestern.edu

Nicholas S. Souleles
Finance Department
The Wharton School
2300 SH-DH
University of Pennsylvania
Philadelphia, PA  19104-6367
Tel: 215/898-9466
Fax: 215/898-6200
E-Mail: souleles@wharton.upenn.edu
M2  - featured in NBER digest on 2005-04-01
AB  - Under the Economic Growth and Tax Relief Reconciliation Act of 2001, most U.S. taxpayers received a tax rebate between July and September, 2001. The week in which the rebate was mailed was based on the second-to-last digit of the taxpayer's Social Security number, a digit that is effectively randomly assigned. Using special questions about the rebates added to the Consumer Expenditure Survey, we exploit this historically unique experiment to measure the change in consumption expenditures caused by receipt of the rebate and to test the Permanent Income Hypothesis and related models. We find that households spent about 20-40 percent of their rebates on non-durable goods during the three-month period in which their rebates were received, and roughly another third of their rebates during the subsequent three-month period. The implied effects on aggregate consumption demand are significant. The estimated responses are largest for households with relatively low liquid wealth and low income, consistent with liquidity constraints.
ER  -