Ricardian or Spender Consumers? Evidence from a Taxpayer Survey Questionnaire

Échevin, Damien (2009): Ricardian or Spender Consumers? Evidence from a Taxpayer Survey Questionnaire. Unpublished.

Abstract

This paper uses a unique survey questionnaire to assess the impact of the 2002 French tax cut on consumption. I find that the proportion of "spender" consumers as opposed to "Ricardian" consumers is relatively high, with 52.7 per cent of the households declaring that they consume their tax cuts. I also find evidence that the average marginal propensity to consume tax cuts (76.5%) is significantly greater than the average marginal propensity to consume temporary rises in earnings (42.4%). This result is consistent with the PIH. Furthermore, the smaller the tax cut, the greater this gap; and the higher the family earnings, the higher the marginal propensity to consume tax cuts, which invalidates the effect of liquidity constraints on consumption in that context.

• Item Type: MPRA Paper
• Language: English
• Keywords: income tax cut; consumption; survey questionnaire; PIH; liquidity constraints.
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H31 - Household; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth

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