EconPapers    
Economics at your fingertips  
 

Check in the mail or more in the paycheck: does the effectiveness of fiscal stimulus depend on how it is delivered?

Claudia R. Sahm (), Matthew D. Shapiro and Joel Slemrod ()

No 2010-40, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Recent fiscal policies have aimed to stimulate household spending. In 2008, most households received one-time economic stimulus payments. In 2009, most working households received the Making Work Pay tax credit in the form of reduced withholding; other households, mainly retirees, received one-time payments. This paper quantifies the spending response to these different policies and examines whether the spending response differed according to whether the stimulus was delivered as a one-time payment or as a flow of payments in the form of reduced withholding. Based on responses from a representative sample of households in the Thomson Reuters/University of Michigan Surveys of Consumers, the paper finds that the reduction in withholding led to a substantially lower rate of spending than the one-time payments. Specifically, 25 percent of households reported that the one-time economic stimulus payment in 2008 led them to mostly increase their spending while only 13 percent reported that the extra pay from the lower withholding in 2009 led them to mostly increase their spending. The paper uses several approaches to isolate the effect of the delivery mechanism from the changing aggregate and individual conditions. Responses to a hypothetical stimulus in 2009, examination of "free responses" concerning differing responses to the policies, and regression analysis controlling for individual economic conditions and demographics all support the primary importance of the income delivery mechanism in determining the spending response to the policies.

Keywords: Consumption (Economics); Fiscal policy (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)
http://www.federalreserve.gov/pubs/feds/2010/201040/201040abs.html (text/html)
http://www.federalreserve.gov/pubs/feds/2010/201040/201040pap.pdf (application/pdf)

Related works:
Journal Article: Check in the Mail or More in the Paycheck: Does the Effectiveness of Fiscal Stimulus Depend on How It Is Delivered? (2012) Downloads
Working Paper: Check in the Mail or More in the Paycheck: Does the Effectiveness of Fiscal Stimulus Depend on How It Is Delivered? (2011) Downloads
Working Paper: Check in the mail or more in the paycheck: does the effectiveness of fiscal stimulus depend on how it is delivered? (2011) Downloads
Working Paper: Check in the Mail or More in the Paycheck: Does the Effectiveness of Fiscal Stimulus Depend on How It Is Delivered? (2011)
Working Paper: Check in the Mail or More in the Paycheck: Does the Effectiveness of Fiscal Stimulus Depend on How It Is Delivered? (2010) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:fip:fedgfe:2010-40

Ordering information: This working paper can be ordered from
http://www.federalre ... /feds/fedsorder.html

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)
Contact information at EDIRC.
Series data maintained by Kris Vajs ().

 
Page updated 2014-08-21
Handle: RePEc:fip:fedgfe:2010-40