Using survey evidence, I estimate the impact of a $12 billion package of household payments delivered in Australia between March and May 2009. Forty percent of households who said that they received the payment reported having spent it. This is approximately twice the spending rate that has been recorded in surveys assessing the 2001 and 2008 tax rebates in the United States. Using an approach for converting spending rates into an aggregate marginal propensity to consume (MPC), this is consistent with an aggregate MPC of 0.41-0.42. Since this estimate is based only on first-quarter spending, it may be an underestimate of the longer-run impact of the package on consumer expenditure.
Regardless of what side of the fence you're on, it's important to note the non-equivalence on the consumption end between tax rebates and stimulus checks. (Albeit between different nations.)
3 comments:
Matt, thanks for the citation. I updated the paper shortly just after you linked to it - noting that one possible explanation is that our payments were called "bonuses", and the US ones were called "rebates". There's a modicum of international evidence to suggest that people are more likely to consume bonuses than rebates.
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