Asymmetric Consumption Smoothing

Brian Baugh, Itzhak Ben-David, Hoonsuk Park and Jonathan Parker

American Economic Review, 2021, vol. 111, issue 1, 192-230

Abstract: Analyzing account-level data from an account aggregator, we find that households increase consumption when they receive expected tax refunds, as if they face liquidity constraints. However, these same households smooth consumption when making payments in other years, primarily by transferring funds among liquid accounts. Even households carrying credit card debt smooth consumption when making payments, and even highly liquid households spend out of refunds. This behavior is inconsistent with pure liquidity constraints or hand-to-mouth behavior and is most consistent with a mental accounting life-cycle model.

JEL-codes: D12 E21 G51 H24 H31 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (23)

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Working Paper: Asymmetric Consumption Smoothing (2018)
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DOI: 10.1257/aer.20181735

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