Consumption, Income Changes, and Heterogeneity: Evidence from Two Fiscal Stimulus Programs

Almost half of American families did not adjust their consumption following receipt of the 2001 or 2008 tax rebates. Another 20 percent, with low income and more likely to rent, spent a small but significant amount. Households with large spending propensity held high levels of mortgage debt. The heterogeneity is concentrated in a few nondurable categories and a handful of “new vehicle” purchases. The cumulated predictions of the heterogeneous response model tend to be smaller and more accurate than their homogeneous response model counterparts, offering new insights on the evaluation of the two fiscal stimulus programs. (JEL D12, D91, E21, E32, E62)