Anticipation and Consumption Linh T. Tô Neil Thakral Boston University Brown University
Dates between bill & payment highlighted: “Mnuchin has previously stated that he could send out stimulus payments within a week of a final package passing. By contrast, the first round of payments were sent 19 days after the CARES Act passed in March”
Question: The design of cash transfers ▸ It is not just about how long it takes for the bill to pass ▸ What about how long it takes between the official announcement and payment receipt? ▸ A “free” policy instrument not previously explored or understood
Tax rebates not the only form of cash transfer ▸ How do we design cash transfers in general? ▸ Not just in developed country contexts but also, or perhaps even more commonly, in developing country contexts
Side note: Cash transfer instead of in-kind? ▸ If you have a thatched / straw rather than metal roof, you’re considered poor ▸ Must be replaced 1 to 2 times a year, at a cost of $100–$150 ▸ But hard to get donors excited about metal roofs!
Tax rebate experiment: 2008 stimulus check
Timing of 2008 tax rebates Group Last two digits Date by which payment of taxpayer SSN funds are deposited 1 00—20 May 2 2 21—75 May 9 Naturally randomized into receiving payment each week (by 3 76—99 May 16 SSN) even with direct deposit payments because a physical notice has to be sent first
How do we know how much people spend? For a representative sample from Nielsen Consumer Panel (Homescan), we know what people spend on for all products with a UPC code: ▸ A sample of 60,000 households ▸ Capturing about 15% to 30% of their total spending
Does the timing of tax rebate matter? ▸ No differences in spending before ▸ By week 4 of receiving payment: ▸ Group 1: $65 ▸ Group 2: $45 ▸ Group 3: $18 ▸ 72% less with 2 more weeks wait Week from payment date
Implication for the 2020 stimulus?
Implication for the 2020 stimulus?
Cash transfer experiment: GiveDirectly Kenya
Haushofer and Shapiro (2016) experiment
Haushofer and Shapiro (2016) experiment ▸ Monthly transfer: USD 45 PPP per month for 9 months ▸ Lump-sum transfer: Full amount in a randomly chosen month over the next 9 months
Haushofer and Shapiro (2016) experiment ▸ Instead of comparing across lump-sum vs monthly… ▸ We focus on how the lump-sum payment may have varying effects on household consumption by when it’s paid out during the 9 months ▸ Monthly transfer: USD 45 PPP per month for 9 months ▸ old data, new question ▸ Lump-sum transfer: Full and analysis amount in a randomly chosen month over the next 9 months
Does the timing of cash transfer matter? Percent difference: Longer vs. shorter wait 50 p=.243 45 p=.255 p=.258 40 35 30 p=.042 25 p=.077 p=0.121 p=.094 p=.134 20 p=.126 p=.178 p=.121 p=.140 15 10 5 0 Total assets Livestock Land M-Pesa savings longer = 5–9 months longer = 4–9 months longer = 6–9 months
Does the timing of cash transfer matter? Percent difference: Longer vs. shorter wait Alcohol Tobacco 0 -10 -20 p=.350 p=.219 -30 p=.137 -40 p=.174 -50 -60 p=.018 -70 p=.003 -80 longer = 5–9 months longer = 4–9 months longer = 6–9 months
The role of anticipation (and planning)
More anticipation time, more planning
More anticipation time, more planning
More anticipation time, more planning
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