Nearly half (49 percent) of recipients reported using the rebate mostly to pay off debt. Most other recipients reported either mostly spending the rebate (30 percent), or mostly saving the rebate (18 percent)... Although there is some variation, this pattern also generally holds true across income groups.That last part surprised me. Like many other stimulus proponents, I expected that lower income households would spend more of the money, and, therefore, funds targeted at them would be more effective stimulus. That is, in the language of the textbook Keynesian model, the marginal propensity to consume would be higher at lower incomes. The survey results suggest otherwise. However, because the benefit phased out at with income, we don't know whether the truly rich would have behaved differently (the top category in the data is households with incomes over $70,000).
Wednesday, October 21, 2009
Income and the Propensity to Consume
Capital Gains and Games points out a report from the BLS, which added some questions about the spring 2008 tax rebate stimulus checks to the consumer expenditure survey. According to the BLS:
Labels: fiscal policy