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  3. American Economic Review: Insights
  4. December 2019
  5. Reported Effects versus Revealed-Preference Estimates: Evidence from the Propensity to Spend Tax Rebates

Reported Effects versus Revealed-Preference Estimates: Evidence from the Propensity to Spend Tax Rebates

  • Jonathan A. Parker
  • Nicholas S. Souleles
American Economic Review: Insights
vol. 1, no. 3, December 2019
(pp. 273-90)
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Abstract

We evaluate the consistency of two methods for estimating the effect of an economic policy: (i) asking people how the policy caused them to change their behavior (reported effects) and (ii) inferring this change using data on behavior and differences in treatment across people (revealed-preference estimates). Both methods are widely used to measure spending caused by increases in liquidity. Using federal stimulus payments disbursed quasi-randomly in 2008, we find larger revealed-preference estimates of spending propensities for households who report greater spending responses, and the methods produce similar average propensities. But evidence is mixed on the relationship between spending propensities and liquidity.

Citation

Parker, Jonathan A., and Nicholas S. Souleles. 2019. "Reported Effects versus Revealed-Preference Estimates: Evidence from the Propensity to Spend Tax Rebates." American Economic Review: Insights, 1 (3): 273-90. DOI: 10.1257/aeri.20180333

Additional Materials

JEL Classification

  • C83 Survey Methods; Sampling Methods
  • D14 Household Saving; Personal Finance
  • D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
  • E62 Fiscal Policy
  • H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
  • H31 Fiscal Policies and Behavior of Economic Agents: Household