Replication data for: Can Tax Rebates Stimulate Consumption Spending in a Life-Cycle Model?
Principal Investigator(s): View help for Principal Investigator(s) Jonathan Huntley; Valentina Michelangeli
Version: View help for Version V1
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Project Citation:
Huntley, Jonathan, and Michelangeli, Valentina. Replication data for: Can Tax Rebates Stimulate Consumption Spending in a Life-Cycle Model? Nashville, TN: American Economic Association [publisher], 2014. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E114286V1
Project Description
Summary:
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We build a life-cycle model with earnings risk, liquidity constraints, and
portfolio choice over tax-deferred and taxable assets to evaluate how
household consumption changes in response to shocks to transitory
anticipated income, such as the 2001 income tax rebate. Households
optimally invest in tax-deferred assets, which are encumbered by
withdrawal penalties, and exchange taxable precautionary savings
for higher after-tax returns. The model predicts a higher marginal
propensity to consume out of a rebate than is predicted by a standard
frictionless life-cycle model. Liquidity-constrained households—with
few financial assets or portfolios expensive to reallocate—consume a
higher fraction of the rebates.
Scope of Project
JEL Classification:
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D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
E21 Macroeconomics: Consumption; Saving; Wealth
G11 Portfolio Choice; Investment Decisions
H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
E21 Macroeconomics: Consumption; Saving; Wealth
G11 Portfolio Choice; Investment Decisions
H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
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