SMU SOE Seminar Series (May 31, 2024): Consumers' Responses to Stimulus Payments with Pre-contribution Design

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ABSTRACT It is well documented consumers spend a substantial fraction of stimulus payments, deviating from standard consumption theory's prediction. We explain this by exploiting a unique stimulus voucher program in Taiwan that required a pre-contribution---paying a lump sum cash upfront. If income is nonfungible this shifted a recipient's cash-on-hand to a voucher account, which is primed for spending. This allows us to use a simple and direct test of income nonfungibility. We showed empirically that this design increased consumer spending per dollar of government subsidy. This implies that consumers' non-trivial response to stimulus payments partly arises from income nonfungibility. Keywords: Consumption Excess Sensitivity, Mental Accounting, Income Nonfungibility, Stimulus Payments, Difference-in-Differences. JEL Codes: D12, D91, E21. Click here to view the CV.
		PRESENTER Kamhon Kan Academia Sinica
		RESEARCH FIELDS Health Economics Labor Economics Applied Microeconometrics
		DATE: 31 May 2024 (Friday)
		TIME: 4pm - 5.30pm
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903