NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Why Don't Households Smooth Consumption? Evidence from a 25 Million Dollar Experiment

Jonathan A. Parker

NBER Working Paper No. 21369
Issued in July 2015, Revised in February 2017
NBER Program(s):Asset Pricing, Corporate Finance, Economic Fluctuations and Growth, Monetary Economics, Public Economics

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.

download in pdf format
   (761 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21369

Published: Parker, Jonathan A. 2017. "Why Don't Households Smooth Consumption? Evidence from a $25 Million Experiment." American Economic Journal: Macroeconomics, 9 (4): 153-83. DOI: 10.1257/mac.20150331

Users who downloaded this paper also downloaded* these:
Stiglitz w21327 The Measurement of Wealth: Recessions, Sustainability and Inequality
Parker, Souleles, Johnson, and McClelland w16684 Consumer Spending and the Economic Stimulus Payments of 2008
Arkolakis w17553 A Unified Theory of Firm Selection and Growth
Obstfeld and Rogoff w7777 The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?
Krugman Revenge of the Optimum Currency Area
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us