Workers' spending response to the 2011 payroll tax cuts

Grant Graziani, Wilbert van der Klaauw, Basit Zafar

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

This paper investigates workers' spending response to the 2011 payroll tax cuts. Respondents were surveyed at the beginning and end of 2011, which allows the comparison of ex ante and ex post reported use of the extra income. While workers on average intended to spend 14 percent of their tax cut income, they ex post reported spending 36 percent of the funds. This pattern of higher spending ex post is shared across all demographic groups. Differences across workers in this shift to greater ex post spending are largely unexplained by differences in either present bias or unanticipated shocks, so in the end the upward revision in spending remains a puzzle.

Original languageEnglish (US)
Pages (from-to)124-159
Number of pages36
JournalAmerican Economic Journal: Economic Policy
Volume8
Issue number4
DOIs
StatePublished - Nov 1 2016
Externally publishedYes

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Payroll tax
Workers
Tax cuts
Income
Present bias
Demographics

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

Workers' spending response to the 2011 payroll tax cuts. / Graziani, Grant; Klaauw, Wilbert van der; Zafar, Basit.

In: American Economic Journal: Economic Policy, Vol. 8, No. 4, 01.11.2016, p. 124-159.

Research output: Contribution to journalArticle

Graziani, Grant ; Klaauw, Wilbert van der ; Zafar, Basit. / Workers' spending response to the 2011 payroll tax cuts. In: American Economic Journal: Economic Policy. 2016 ; Vol. 8, No. 4. pp. 124-159.
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