NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Tax Policy and Consumer Spending: Evidence from Japanese Fiscal Experiments

Katsunori Watanabe, Takayuki Watanabe, Tsutomu Watanabe

NBER Working Paper No. 7252
Issued in July 1999
NBER Program(s):   PE

This paper studies the extent to which the impact of tax policy on consumer spending differs between temporary and permanent, as well as anticipated and unanticipated tax changes. To discriminate between them, we use institutional information such as legal distinction between temporary and permanent tax changes, as well as timing of policy announcement and implementation. We find that the impact of temporary changes is significantly smaller than the impact of permanent changes. We also find that more than 80 per cent of Japanese consumers, including those who distinguish between temporary and permanent tax changes, respond to tax changes at the time of their implementation and not at the time of a policy announcement. We suggest an interpretation that these consumers follow a near-rational decision rule.

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Document Object Identifier (DOI): 10.3386/w7252

Published: Watanabe, Katsunori, Takayuki Watanabe and Tsutomu Watanabe. "Tax Policy And Consumer Spending: Evidence From Japanese Fiscal Experiments," Journal of International Economics, 2001, v53(2,Apr), 261-281.

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