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Ricardian or Spender Consumers? Evidence from a Taxpayer Survey Questionnaire

Damien Échevin ()

Economics Bulletin, 2010, vol. 30, issue 2, 1526-1538

Abstract: This paper uses a unique survey questionnaire to assess the impact of the 2002 French tax cut on consumption. I find that the proportion of "spender" consumers as opposed to "Ricardian" consumers is relatively high, with 52.7 per cent of the households declaring that they consume their tax cuts. I also find evidence that the average marginal propensity to consume tax cuts (76.5%) is significantly greater than the average marginal propensity to consume temporary rises in earnings (42.4%). This result is consistent with the PIH. Furthermore, the smaller the tax cut, the greater this gap; and the higher the family earnings, the higher the marginal propensity to consume tax cuts, which invalidates the effect of liquidity constraints on consumption in that context.

Keywords: income tax cut; consumption; survey questionnaire; PIH; liquidity constraints (search for similar items in EconPapers)
JEL-codes: D1 H2 (search for similar items in EconPapers)
Date: 2010-05-25
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