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

Jonathan Parker

No 21369, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: D14 E21 (search for similar items in EconPapers)
Date: 2015-07
New Economics Papers: this item is included in nep-exp and nep-mac
Note: AP CF EFG ME PE
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Citations: View citations in EconPapers (6)

Published as 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

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