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Next Brown Bag

Monday, Oct 12
Joe Grengs, Policy & Planning for Social Equity in Transportation

Matthew D. Shapiro photo

Did the 2008 Tax Rebates Stimulate Spending?

Publication Abstract

Shapiro, Matthew D., and J. Slemrod. 2009. "Did the 2008 Tax Rebates Stimulate Spending?" American Economic Review, 99(2): 374-379.

Only one-fifth of respondents to a rider on the University of Michigan Survey Research Center's Monthly Survey said that the 2008 tax rebates would lead them to mostly increase spending. Almost half said the rebate would mostly lead them to pay off debt, while about a third saying it would lead them mostly to save more. The survey responses imply that the aggregate propensity to spend from the rebate was about one-third, and that there would not be substantially more spending as a lagged effect of the rebates. Because of the low spending propensity, the rebates in 2008 provided low "bang for the buck" as economic stimulus. Putting cash into the hands of the consumers who use it to save or pay off debt boosts their well-being, but it does not necessarily make them spend. Low-income individuals were particularly likely to use the rebate to pay off debt.

DOI:10.1257/aer.99.2.374 (Full Text)

PMCID: PMC3522430. (Pub Med Central)

Country of focus: United States of America.

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