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Workers' Spending Response to the 2011 Payroll Tax Cuts

Grant Graziani, Wilbert van der Klaauw () and Basit Zafar

American Economic Journal: Economic Policy, 2016, vol. 8, issue 4, 124-59

Abstract: This paper investigates workers' spending response to the 2011 payroll tax cuts. Respondents were surveyed at the beginning and end of 2011, which allows the comparison of ex ante and ex post reported use of the extra income. While workers on average intended to spend 14 percent of their tax cut income, they ex post reported spending 36 percent of the funds. This pattern of higher spending ex post is shared across all demographic groups. Differences across workers in this shift to greater ex post spending are largely unexplained by differences in either present bias or unanticipated shocks, so in the end the upward revision in spending remains a puzzle.

JEL-codes: D12 D91 E21 H24 H31 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/pol.20140065
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American Economic Journal: Economic Policy is currently edited by Matthew Shapiro

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Handle: RePEc:aea:aejpol:v:8:y:2016:i:4:p:124-59