Anticipation and Consumption Linh T. T Neil Thakral Boston - - PowerPoint PPT Presentation

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Dec 31, 2023 520 likes •752 views

Anticipation and Consumption Linh T. T 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

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Anticipation and Consumption

Neil Thakral Brown University Linh T. Tô Boston University

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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”

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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

r understood

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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

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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!

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Tax rebate experiment: 2008 stimulus check

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Timing of 2008 tax rebates

Naturally randomized into receiving payment each week (by SSN) even with direct deposit payments because a physical notice has to be sent first

Group Last two digits

f taxpayer SSN

Date by which payment funds are deposited 1 00—20 May 2 2 21—75 May 9 3 76—99 May 16

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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

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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

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Implication for the 2020 stimulus?

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Implication for the 2020 stimulus?

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Cash transfer experiment: GiveDirectly Kenya

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Haushofer and Shapiro (2016) experiment

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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

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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

▸old data, new question and analysis

▸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

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Does the timing of cash transfer matter?

p=.094 p=.243 p=.077 p=.126 p=.042 p=.255 p=0.121 p=.140 p=.134 p=.258 p=.178 p=.121 5 10 15 20 25 30 35 40 45 50

Total assets Livestock Land M-Pesa savings

Percent difference: Longer vs. shorter wait

longer = 5–9 months longer = 4–9 months longer = 6–9 months

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Does the timing of cash transfer matter?

p=.018 p=.137 p=.174 p=.350 p=.003 p=.219

Alcohol Tobacco

Percent difference: Longer vs. shorter wait

longer = 5–9 months longer = 4–9 months longer = 6–9 months

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The role of anticipation (and planning)

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More anticipation time, more planning

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More anticipation time, more planning

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