TY  - JOUR
AU  - Sahm,Claudia R.
AU  - Shapiro,Matthew D.
AU  - Slemrod,Joel B.
TI  - Household Response to the 2008 Tax Rebate: Survey Evidence and Aggregate Implications
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15421
PY  - 2009
Y2  - October 2009
UR  - http://www.nber.org/papers/w15421
L1  - http://www.nber.org/papers/w15421.pdf
N1  - Author contact info:
Claudia R. Sahm
Federal Reserve Board
21st and C Street NW
Washington DC 20551
Tel: 571-490-2223
E-Mail: Claudia.R.Sahm@frb.gov

Matthew D. Shapiro
Department of Economics
University of Michigan
611 Tappan St
Ann Arbor, MI 48109-1220
Tel: 734/764-5419
Fax: 734 764-2769
E-Mail: shapiro@umich.edu

Joel Slemrod
University of Michigan Business School
701 Tappan Street
Room R5396
Ann Arbor, MI  48109-1234
Tel: 734/936-3914
Fax: 734-615-4323
E-Mail: jslemrod@umich.edu
M1  - published as Claudia R. Sahm, Matthew D. Shapiro, Joel Slemrod. "Household Response to the 2008 Tax Rebate: Survey Evidence and Aggregate Implications," in Jeffrey R. Brown, editor, "Tax Policy and the Economy, Volume 24" The University of Chicago Press (2010)

M3  - presented at "Tax Policy & the Economy", September 24, 2009
AB  - Only about one-fifth of respondents in the Reuters/University of Michigan survey report that the 2008 tax rebates led them to mostly increase spending, while over half said it would lead them to mostly pay off debt.  Of those in the mostly-spend category, the response was swift, with over 80 percent reporting increasing their spending within three months of receiving their rebate.  Older households, households with higher wealth and higher income, and those expecting future income growth were generally more likely to spend the rebates.  A review of other surveys confirms the general pattern of results and suggests that small changes in survey design do not have a major effect on the distribution of responses.

The distribution of survey answers corresponds to an aggregate MPC after one year of about one-third.  The paper combines this survey-based estimate of the MPC and the survey-based estimate of the timing of spending to show that the rebates help explain the aggregate movements in saving, spending, and debt in 2008. Because the rebate was large and distributed over a short period, it had a non-trivial effect on total spending in the second and third quarters of 2008.  Nonetheless, the results imply that the rebates provided only a modest stimulus to spending per dollar of rebate.
ER  -