Consumer Spending and the Economic Stimulus Payments of 2008

Jonathan A. Parker, Nicholas S. Souleles, David S. Johnson, Robert McClelland

NBER Working Paper No. 16684
Issued in January 2011
NBER Program(s):   EFG   ME   PE

We measure the response of household spending to the economic stimulus payments (ESPs) disbursed in mid-2008, using special questions added to the Consumer Expenditure Survey and variation arising from the randomized timing of when the payments were disbursed. We find that, on average, households spent about 12-30% (depending on the specification) of their stimulus payments on nondurable expenditures during the three-month period in which the payments were received. Further, there was also a substantial and significant increase in spending on durable goods, in particular vehicles, bringing the average total spending response to about 50-90% of the payments. Relative to research on the 2001 tax rebates, these spending responses are estimated with greater precision using the randomized timing variation. The estimated responses are substantial and significant for older, lower-income, and home-owning households. We find little evidence that the propensity to spend varies with the method of disbursement (paper check versus electronic transfer).

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Acknowledgments

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