consumption and debt response to unanticipated income shocks evidence from a natural experiment in singapore abstract this paper uses a unique panel dataset of consumer financial transactions to study how consumers respond to an exogenous unanticipated income shock consumption rose significantly after th

the consumption response to predictable changes in discretionary income evidence from the repayment of vehicle loans abstract although the life cycle permanent income hypothesis is the primary framework for understanding household consumption and savings decisions only a few studies have used clearly identifiable income changes to test the basic predictions of the model the estimates produced using this empirical strategy have yet to lead to a consensus of beliefs since the results have both favored and rejected the model this paper contributes to this literature by examining the consumption reaction to predictable increases in discretionary income following the final payment of a vehicle loan using data from the consumer expenditure survey the results show that a 10 increase in discretionary income due to a loan repayment leads to a 2 to 3 increase in nondurable consumption additional analysis suggests that these findings may be explained by the presence of borrowing constraints

price pass through and the minimum wage this paper tests a textbook consequence of competitive markets that an industry wide increase in the price of labor is passed on to consumers through an increase in prices using several data sources on restaurant prices i explore the price impact of minimum wage hikes in canada and the united states particular attention is paid to the timing of these price responses to gauge the stickiness of minimum wage cost shocks i find that restaurant prices generally rise with changes in the wage bill and that this response is concentrated in the quarter surrounding the month during which the legislation is enacted

job displacement and financial outcomes abstract using two proprietary datasets on earnings and credit outcomes this paper finds that both high and low earners take a significant and persistent hit to income after job displacement but these losses only translate into worse credit conditions higher credit card utilization lower fico scores and a pick up in the rate of card accounts that are delinquent or over limit among low earners we observe no negative implications among higher income households providing novel empirical evidence of the economically disparate impact of job loss

effects of the minimum wage on the employment status of youths an update the large decline in the relative value of the minimum wage during the 1980s makes that period a valuable one for identifying the impact of variation in the minimum wage on youth employment this study produces the robust finding that when the experience of the 1980s is included a 10 percent increase in the minimum wage is estimated to reduce teen employment by less than 1 percent the lower end of the range of previous estimates because this small employment effect is offset by a labor force withdrawal effect the study finds no discernible effect on measured unemployment the study also finds no apparent effect of the minimum wage on the employment of young adults aged 20 24

minimum wage and real wage inequality evidence from pass through to retail prices this paper considers the impact of the minimum wage on both labor and product markets using detailed store level scanner data i provide empirical evidence that a 10 increase in the minimum wage r

tax cuts for whom heterogeneous effects of income tax changes on growth and employment this paper investigates how tax changes for different income groups affect aggregate economic activity i construct a measure of who received or paid for tax changes in the postwar period using t

final voting in legislatures in representative democracies such as the united states legislatures provide the transmission mechanism through which pressure from private interests becomes public policy considerable attention has been given in the literature to explanations of the relevant forces that appear to be driving the legislative process for example much research has focused on the relative impact of economic vs ideological influences on congressional voting behavior in this approach the way that legislators vote on proposed legislation is modeled as a function of the preferences of various economic and ideological interests groups including the legislator s own preferences for wealth and ideology james kau and paul rubin 1979 joseph kalt and mark zupan 1984 sam peltzman 1985 missing from this approach is the idea that when legislatures are the transmission mechanism they are costly and imperfect organizations for generating political influence gary becker 1983 as such rules and institutions will emerge that are related to problems of internal control within the organization of a legislature in this paper we focus on the role of floor voting from the standpoint of legislator organization and control we seek to expand the interpretation of the meaning of floor voting activity by examining the timing sequence and outcomes of such votes specifically we look at final floor voting in the u s congress the patterns described in the analysis below suggest that a broader analytical perspective on the economic function of floor voting is required the findings also suggest that to identify more precisely the forces that are driving legislator voting behavior it is important to recognize the role of legislative transactional costs and institutional constraints in section i the conceptual framework for the empirical results is discussed in more detail the purpose is not to develop a fullblown theory of legislative organization rather it is to focus the reader s attention on several hypotheses about the function of final floor voting as a device for controlling legislator behavior within the legislature empirical results including an explanation of the timing and sequence of final votes on bills are reported in section ii the data for these tests are drawn from legislative activities in the u s house of representatives during the 96th and 98th congresses some concluding remarks are offered in section iii

tax policy and heterogeneous investment behavior abstract we estimate the effect of temporary tax incentives on equipment investment using shifts in accelerated depreciation analyzing data for over 120 000 firms we present three findings first

do banks pass through credit expansions to consumers who want to borrow we examine the ability of policymakers to stimulate household spending during the great recession by reducing banks cost of funds using panel data on 8 5 million credit cards and 743 credit limit regression discontinuities we find that the one year marginal propensity to borrow mpb is declining in credit score falling from 59 for consumers with fico scores below 660 to essentially zero for consumers with fico scores above 740 we use the same credit limit discontinuities combined with a model of lending to estimate banks marginal propensity to lend mpl out of a decrease in their cost of funds for the lowest fico score consumers higher credit limits sharply reduce profits from lending limiting banks incentives to pass through credit expansions to these consumers we conclude that banks mpl is lowest for consumers with the highest mpb and discuss the implications for policies that aim to stimulate the economy through banks

consumer spending and the economic stimulus payments of 2008 abstract we measure the change in household spending caused by receipt of the economic stimulus payments of 2008 using questions added to the consumer expenditure survey and variation from the ran

the minimum wage restaurant prices and labor market structure using store level and aggregated consumer price index data we show that restaurant prices rise in response to minimum wage increases under several sources of identifying variation we introduce a general model of employment determination that implies minimum wage hikes cause prices to rise in competitive labor markets but potentially fall in monopsonistic environments furthermore the model implies employment and prices are always negatively related therefore our empirical results provide evidence against the importance of monopsony power for understanding small observed employment responses to minimum wage changes our estimated price responses challenge other explanations of the small employment response too

consumer durables and inertial behaviour estimation and aggregation of s s rules for automobile purchases the s s model originally introduced in the study of inventories see arrow et al 1951 scarf 1959 has recently received renewed attention both in the durable consumption and in the investment and labour demand literatures caballero 1993 for instance appeals to these type of models to explain the time series properties of durable expenditure and in particular the persistence or slow adjustment of such a variable in this paper i model the purchase behaviour of automobiles by u s households as an s s rule i estimate a flexible specification of such a rule using a large microeconomic data set and study some of the aggregate implications of this type of inertial behaviour the paper is one of the first attempts at estimating directly the parameters of an s s rule using micro data because of this some of the methodological issues concerning the specification and the estimation of s s rules are relevant for many potential applications furthermore the paper is one of the first to discuss and quantify the aggregate implications of an s s rule estimated on micro data in the presence of non convex transaction costs a full and consistent characterization of individual behaviour is very hard and typically requires strong restrictions grossman and laroque 1991 prove that an s s rule is optimal for a consumption and investment problem under very special circumstances some of their results were extended by eberly 1991 and beaulieu 1993a b eberly 1991 in particular has derived some closed form solutions for durable consumption in the presence of transaction costs while caballero and engel 1994 construct a model of investment where an s s rule is optimal the main problem with these theoretical results is that it is only possible to show optimality of s s rules under very stringent conditions in particular a necessary condition to derive them is that the optimization problem faced by an individual consumer can be reduced to a problem with a single state variable unfortunately as pointed out by bar ilan and blinder 1992 even simple generalizations are extremely difficult to analyse

the response of expenditures to anticipated income changes panel data estimates standard models of intertemporal allocation predict that the time path of expenditures should be independent of the time path of income recently two papers parker 1999 and souleles 1999 have suggested that u s households have a high marginal propensity to spend within year anticipated income changes we use an expenditure survey panel from spain to re examine this issue we exploit two important features of the spanish data first we have quarterly panel data that follows households for more than four quarters second we use the fact that workers are exogenously sorted into one of two payment schemes some receive the same amount each month of the year and others receive an extra payment in june and december the extra payment is large and predictable we examine the detailed pattern of expenditures over the year to see whether they differ between the two groups we fail to find even weak differences we complement this with a conventional euler equation analysis of excess sensitivity our predicting equation for quarterly earnings growth is much better than usual and is likely to give a powerful test of the hypothesis that predictable changes in income do not lead to changes in expenditure patterns the results of this analysis confirm the graphical analysis we find no evidence of excess sensitivity we conclude that households in normal times do smooth consumption over the year we suggest a reconciliation of our results with those of parker and souleles

household expenditure and the income tax rebates of 2001 using questions expressly added to the consumer expenditure survey we estimate the change in consumption expenditures caused by the 2001 federal income tax rebates and test the permanent income hypothesis we exploit the unique randomized timing of rebate receipt across households households spent 20 to 40 percent of their rebates on nondurable goods during the three month period in which their rebates arrived and roughly two thirds of their rebates cumulatively during this period and the subsequent three month period the implied effects on aggregate consumption demand are substantial consistent with liquidity constraints responses are larger for households with low liquid wealth or low income

luxuries are easier to postpone a proof we show that marshallian income elasticities are proportional to frisch own price elasticities if all goods are additively separable this implies that luxuries are likely to be easier to postpone it also implies that preferences over consumption are unlikely to display a constant elasticity of substitution

the wage mobility of minimum wage workers using longitudinal data from the survey of income and program participation the authors examine the earnings mobility of workers employed at the minimum wage results indicate that over 60 of wor

durable goods an explanation for their slow adjustment at the microeconomic level durable purchases are often discontinuous and relatively large this feature has the potential to explain why aggregate expenditure on durables responds only slowly relative to the frictionless permanent income model to wealth and other aggregate innovations in this paper i develop new results on the problem of dynamic aggregation of stochastically heterogeneous units which help to characterize the connection between microeconomic behavior and aggregate dynamics in the presence of nonconvex adjustment costs using these results and splitting postwar u s aggregate durable purchases into different subcategories and time periods i provide further support for the view that lumpy microeconomic purchases play an important role in explaining the time series behavior of aggregate expenditure on durable goods

homeowner borrowing and housing collateral new evidence from expiring price controls i empirically analyze how changes to the collateral value of real estate assets affect homeowner borrowing behavior while previous research has documented a positive relationship between house prices and home equity based borrowing a key empirical challenge has been to disentangle the role of collateral constraints from that of wealth effects in generating this relationship to isolate the role of collateral constraints i exploit the expiration of resale price controls on owner occupied housing units created through an inclusionary zoning regulation in montgomery county maryland because the duration and stringency of the price controls are set by formula and known in advance their expiration has no effect on expected lifetime wealth but directly shocks collateralized borrowing capacity using data on all transactions and loans secured against every property in the county from 1997 2012 i estimate that the marginal propensity to borrow out of increases in housing collateral induced by expiring price controls is between 0 04 and 0 13 the magnitude of this effect is correlated with a homeowner s initial leverage and indicates that a significant fraction of the additional borrowing arising from house price increases is due to relaxing collateral constraints additional analysis of residential investment and ex post loan performance further suggests that borrowers used at least some portion of the extracted funds to finance current consumption and investment expenditures these results highlight the importance of collateral constraints for homeowner borrowing and suggest a potentially important role for house price growth in driving aggregate consumption

estimation and inference of distributional partial effects theory and application abstractthis article considers nonparametric and semiparametric estimation and inference of the effects of a covariate either discrete or continuous on the conditional distribution of a response outcome it also proposes various uniform tests following estimation this type of analysis is useful in situations where the econometrician or policy maker is interested in knowing the effect of a variable or policy on the whole distribution of the response outcome conditional on covariates and is not willing to make parametric functional form assumptions monte carlo experiments show that the proposed estimators and tests are well behaved in small samples the empirical section studies the effect of minimum wage hikes on household labor earnings it is found that the minimum wage has a heterogenous impact on household earnings in the u s and that small hikes in the minimum wage are more effective in improving the household earnings distribution

the reaction of household consumption to predictable changes in social security taxes the key implication of rational expectations and the basic life cycle permanent income hypothesis that predictable changes in income have no effect on the growth rate of consumption expenditures is examined this implication is important for understanding the effectiveness and optimal timing of fiscal policy the causes and propagation of business cycles and the effects of income fluctuations on the growth rate of the economy using household level consumption data from the consumer expenditure survey whether expenditures on nondurable goods increase contemporaneously with predictable changes in social security tax withholding is tested it is found that households do change their consumption expenditures in response to the predictable fluctuations in income induced by the social security tax system

industry dynamics and the minimum wage a putty clay approach we document two new findings about the industry level response to minimum wage hikes first restaurant exit and entry both rise following a hike second there is no change in employment among continuing restaurants we develop a model of industry dynamics based on putty clay technology that is consistent with these findings in the model continuing restaurants cannot change employment and thus industry level adjustment occurs gradually through exit of labor intensive restaurants and entry of capital intensive restaurants interestingly the putty clay model matches the small estimated short run disemployment effect of the minimum wage found in other studies but produces a larger long run disemployment effect

do consumers react to anticipated income changes evidence from the alaska permanent fund a central implication of the life cycle permanentincome hypothesis lc pih is that consumers should not respond to predictable changes in their income to test this hypothesis a number of recent papers have exploited natural experiments to identify anticipated income changes in particular recent work by parker 1999 uses the change in after tax income due to the cap on earnings subject to the social security tax and a related paper by souleles 1999 examines the response of consumption to income tax refunds surprisingly parker and souleles find that even when income is expected to change within the year expenditure is excessively sensitive to the timing of the income change while their results can be interpreted as evidence that our canonical model of consumption is inadequate an alternative explanation is that the anticipated income changes they exploit are small and irregular and that households will not bother to change their consumption paths when the computational costs involved are large relative to the utility gains in support of this interpretation browning and collado 2001 find that the seasonal consumption patterns of spanish households that work in sectors that provide regular bonus payments do not differ from those of households that do not receive bonus payments this paper adds to this evidence by exploiting a natural experiment provided by annual payments from the state of alaska s permanent fund to every resident in the state of alaska that should yield an unusually powerful test of the lc pih these payments are large and clearly anticipated by alaskan residents using the variation in the size of the payments over time and in the amount received by families of different sizes to identify the response of consumption to payments from the permanent fund i find no evidence that the consumption of alaskan households reacts to these payments in addition i find no evidence that the seasonal pattern of consumption in alaska differs from that in the other 49 states or that households in alaska are subject to fewer liquidity constraints engage in less buffer stock saving or spend a smaller fraction of their income on semidurable goods than households in the rest of the united states however although households in alaska do not overreact to payments from the permanent fund i find that the consumption of the very same households is excessively sensitive to their income tax refunds this evidence suggest that households will take anticipated income changes into account in their consumption decisions when the income changes are large regular and easy to predict but will not do so when they are small and irregular the paper proceeds as follows the next section of the paper presents details on the department of economics princeton university princeton nj 08544 and national bureau of economic research e mail chsieh princeton edu i am very grateful to the bureau of labor statistics bls for providing access to the data from the consumer expenditure survey and to its staff particularly steven henderson walter vandeheide and wolf weber for their generous assistance during my visits to the bls i also thank nanci jones for providing data and patiently answering questions on the operation of the alaska permanent fund anne case angus deaton jonathan parker and two referees provided useful comments the views expressed in this paper are personal and should not be attributed to the bls 1 i refer to the certainty equivalent version of the lc pih or one in which the expected variance of consumption is constant as is well known without these assumptions the lc pih only implies smoothing of marginal utility not necessarily of consumption 2 see christina h paxson 1992 john shea 1995 jonathan a parker 1999 nicholas s souleles 1999 martin browning and m dolores collado 2001 also see ronald a bodkin 1959 for an early example of the use of a natural experiment to test for excess sensitivity for comprehensive reviews of the large literature on empirical tests of the lc pih see angus deaton 1992 browning and annamaria lusardi 1996 and browning and thomas f crossley 2001 3 in 1998 for example the permanent fund paid 1 541 to every resident of the state of alaska

do homeowners increase consumption after the last mortgage payment an alternative test of the permanent income hypothesis the maturity date of a mortgage loan marks the end of monthly mortgage payments for homeowners in the period after the last payment homeowners experience an increase in their disposable income our study interprets this event as an anticipated increase in income and tests whether households smooth consumption over the transition period as predicted by the rational expectation life cycle permanent income hypothesis we find households do not alter nondurable goods consumption in the period following the last mortgage payment instead they increase both financial savings and savings in durable goods such as house furnishings and entertainment equipment in the year of the last mortgage payment

minimum wage effects throughout the wage distribution this paper provides evidence on a wide set of margins along which labor markets can adjust in response to increases in the minimum wage including wages hours employment and ultimately labor income not surprisingly the evidence indicates that low wage workers are most strongly affected while higher wage workers are little affected workers who initially earn near the minimum wage experience wage gains nevertheless their hours and employment decline and the combined effect of these changes on earned income suggests adverse consequences on net for low wage workers

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

wage shocks and the technological substitution of low wage jobs we extend the task based empirical framework used in the job polarization literature to analyze the susceptibility of low wage employment to technological substitution we nd that increases in the cost of low wage labor via minimum wage hikes lead to relative employment declines at cognitively routine occupations but not manuallyroutine or non routine low wage occupations this suggests that low wage routine cognitive tasks are susceptible to technological substitution while the short run em

environmental costs at a canadian paper mill a case study of environmental management accounting ema abstract an environmental management accounting ema framework is applied to the 2000 year end financial report for the mackenzie paper division paper mill owned and operated by abitibi consolidated inc of montreal quebec a conventional reading of the obvious environmental costs from this financial report is cdn 2 196 838 this figure is derived from an analysis of effluent treatment costs and other line item environmental costs there is no environmental account category that breaks out either costs or the mass balance of inputs and outputs for the most part environmental costs are rolled up into overhead accounts such as administration infrastructure and materials accounts application of the ema framework is based on assigning environmental costs to one of four categories for which a tentative breakdown is as follows 1 waste and emission treatment costs 3 348 902 2 prevention and environmental management costs 270 109 3 material purchase value of non product output costs 946 799 and 4 processing costs of non product output 2 92 943 there is also a category called environmental revenues of which none were reported conservative estimates thus place the total environmental costs at 4 858 753 what is significant about this result is that the environmental costs under ema are at least twice as much as would normally be reported this supports the view that environmental costs are much higher than generally considered and makes it clear that many important environmental costs as well as benefits are hidden in other accounts more studies of a similar design are required to confirm the validity of the ema methodology reported here

environmental management accounting as a reflexive modernization strategy in cleaner production abstract understanding the material purchase value of wastes and emissions and related processing costs is the essential contribution of an environmental management accounting methodology proposed by a united nations expert working group organised through the division for sustainable development undsd tracing costs and benefits according to this undsd methodology considered as a reflexive modernization strategy in this article sheds new light on cleaner production initiatives for corporate sustainability information on the first category of costs waste and emission treatment is generally the most accurate information on the second category prevention and environmental management costs is more difficult to determine because this category overlaps with or is confused with the first category of costs data for the two novel and innovative cost categories of the material purchase value of waste and emissions and related processing costs are even harder to obtain frequently the costs are either hidden in overhead accounts or are not recorded because they are not required in conventional accounting systems the outcome is that companies even though they may profess otherwise have very little knowledge about their full environmental costs cost saving opportunities or how best to achieve cleaner production initiatives to promote corporate sustainability a more systematic application of the undsd ema methodology would provide a better record of costs and act as a catalyst in promoting cleaner production processes this application inevitably requires reflexive institutions including reflexive corporations that is corporations with the capacity to examine the side effects of their operations as modernization rebounds upon them

how much are car purchases driven by home equity withdrawal previous research indicates that changes in housing wealth affect consumer spending on cars we find that home equity extraction plays only a small role in this relationship consumers rarely use funds from equity extraction to purchase a car directly even during the mid 2000s housing boom this finding holds across three nationally representative household surveys we find in credit bureau data that equity extraction does lead to a statistically significant increase in auto loan originations consistent with equity extraction easing borrowing constraints in the auto loan market this channel though accounts for only a tiny share of overall car purchases

the effects of minimum wages on the distribution of family incomes a nonparametric analysis an oft stated goal of the minimum wage is to raise incomes of poor or low income families we present nonparametric estimates of the effects of minimum wages on the distribution of family income relative to needs in the united states although minimum wages increase the incomes of some poor families the evidence indicates that their overall net effect is if anything to increase the proportions of families with incomes below or near the poverty line it would appear that reductions in the proportions of families that are poor or near poor should not be counted among the potential benefits of minimum wages

do liquidity constraints and interest rates matter for consumer behavior evidence from credit card data this paper utilizes a unique new dataset of credit card accounts to analyze how people respond to changes in credit supply the data consist of a panel of thousands of individual credit card accounts from several different card issuers with associated credit bureau data we estimate both marginal propensities to consume mpcs out of liquidity and interest rate elasticities we also evaluate the ability of different models of consumption to rationalize our results distinguishing the permanent income hypothesis pih liquidity constraints precautionary saving and behavioral models we find that increases in credit limits generate an immediate and significant rise in debt counter to the pih the average mpc out of liquidity ddebt dlimit ranges between 10 14 the mpc is much larger for people starting near their limits consistent with binding liquidity constraints however the mpc is significant even for people starting well below their limit we show this response is consistent with buffer stock models of precautionary saving nonetheless there are other results that conventional models cannot easily explain e g why so many people are borrowing on their credit cards and simultaneously holding low yielding assets unlike most other studies we also find strong effects from changes in account specific interest rates the long run elasticity of debt to the interest rate is approximately 1 3 less than half of this elasticity represents balance shifting across cards with most reflecting net changes in total borrowing the elasticity is larger for decreases in interest rates than for increases which can explain the widespread use of temporary promotional rates the elasticity is smaller for people starting near their credit limits again consistent with liquidity constraints

the use of environmental management accounting ema for identifying environmental costs abstract the expert working group on improving the role of government in the promotion of environmental management accounting ema was set up by the united nations division for sustainable development un dsd in cooperation with a number of government agencies and non governmental experts to promote environmental management accounting ema through publications pilot projects and by establishing an international forum for discussion on the role of governments in the promotion of ema ema environmental management accounting represents a combined approach that provides for the transition of data from financial accounting cost accounting and mass balances to increase material efficiency reduce environmental impacts and risks and reduce costs of environmental protection ema is performed by private or public corporations but not by nations and has a financial as well as a physical component the core focus of environmental management accounting and of the ema un dsd methodology is assessment of total annual environmental expenditure on emission treatment disposal environmental protection and management in addition and that is new and challenging for most companies the material purchase value of all non product output and its production costs are added this total sum often provides a frightening picture of total annual costs of inefficiency and gets companies to improve their information systems and material efficiency options which is the goal in the light of cleaner production the first book published by the expert working group environmental management accounting procedures and principles jasch c united nations new york 2001 defines principles and procedures for ema with a focus on techniques for quantifying environmental expenditures or costs as a basis for better controlling and benchmarking purposes the methodology excludes costs external to the company so called externalities e g environmental and social effects that occur to the general public but focuses on comprehensive assessment of direct annual expenditure on emission treatment environmental protection and management as well as wasted material and energy input efficiency losses in production firstly total annual expenditure is assessed then improvement options savings and investment projects as well as product prices can be re calculated the method is currently applied in several case studies the following summary provides some of the core definitions and generic assessment tables

the spending and debt response to minimum wage hikes abstract immediately following a minimum wage hike household income rises on average by about 250 per quarter and spending by roughly 700 per quarter for households with minimum wage workers most of the spending response is caused by a small number of households who purchase vehicles furthermore we find that the high spending levels are financed through increases in collateralized debt our results are consistent with a model where households can borrow against durables and face costs of adjusting their durables stock jel d12 d14 d91 j38

integrating information about the cost of carbon through activity based costing abstract environmental protection has been an issue of serious concern for many years it is not a trend but the responsibility of corporations this responsibility for environmental protection should be internalized into business operations prior to production in order to reflect the true cost of the final product due to the use of traditional cost accounting many organizations have not estimated their environmental costs precisely therefore environmental accounting systems such as carbon management accounting environmental management accounting and greenhouse gas accounting have attracted worldwide attention in this paper we propose an integrated concept the activity based costing approach to solve the problem of environmental and cost evaluation we include a case study of an existing pulp and paper company in taiwan to show that the activity based costing method estimates emissions of waste and the environmental costs of a final product more accurately than traditional approaches do the method can therefore provide information for use in existing environmental accounting systems and help managers incorporate environmental costs into their decision making processes

liquidity constraints and imperfect information in subprime lending ditions for precisely the population that is most likely to have a difficult time obtaining credit those with low incomes and poor credit histories these consumers who typically cannot qualify for regular bank loans comprise the so called subprime market because the company we study originates subprime loans its loan applications and transaction records provide an unusual win dow into the consumption and borrowing behavior of households that are rationed in primary credit markets moreover we track loan repayments allowing us to analyze the difficulties in lending to the subprime population we begin by documenting the importance of short term liquidity constraints for individuals in our sample we present two pieces of evidence both are based on purchasing behavior and indicate a high sensitivity to cash on hand first we document a dramatic degree of demand seasonality associated with tax rebates overall demand is almost 50 percent higher during tax rebate season than during other parts of the year this seasonal effect varies with household

the impact of snap vehicle asset limits on household asset allocation beginning in 2001 states were given the authority to formulate their own rules on how vehicles are counted toward the asset limit in the supplemental nutritional assistance program we exploit differences in timing of the state vehicle asset policy changes to identify their effect on vehicle assets and debts car ownership liquid assets holdings as well as non housing wealth we estimate difference in differences and household fixed effects specifications and find that liberalizing vehicle asset rules increases vehicle assets of households with a high ex ante probability of program participation households also take on more debt to finance their vehicles the increase in car value can be attributed primarily to less educated single parents who already owned a car before the policy change buying more expensive cars

the response of household consumption to income tax refunds a central implication of the life cycle or permanent income theory is that consumption should not respond to predictable fluctuations in income tests of this implication have yielded mixed results especially on micro data angus deaton 1992 martin browning and annamaria lusardi 1996 in large part this might be due to the difficulties of isolating the predictable component of income at the micro level most tests proceed by instrumenting for income but since the available instruments are typically poor such tests might be prejudiced against finding significant excess sensitivity of consumption to income john shea 1995 also it is not clear how closely the resulting econometric predictions of income coincide with agents actual expectations of income to avoid these difficulties this paper examines the response of household consumption to a particular type of income that is both predictable and transitory income tax refunds since a refund depends on events in the previous calendar year it is predictable income as regards consumption in the year of its receipt consequently under the life cycle theory consumption should not increase on receipt of a refund 2 in addition to testing the canonical model of consumption this paper provides estimates interpretable as the marginal propensity to consume mpc out of refunds since federal tax refunds now amount to over 80 billion per year averaging well over 1 000 per refund these estimates are of interest in themselves more generally they bear on the impact of even preannounced and temporary changes in fiscal policy the paper begins by surveying related studies in section i section ii describes the data the consumer expenditure survey cex which of the leading u s micro data sets has the most comprehensive coverage of expenditure the empirical specification is set out in section hi section iv reports the results and section v concludes

balladurette and juppette a discrete analysis of scrapping subsidies this paper studies the effects of subsidies on durable goods markets in particular we focus on a recent policy in france in which the governments of balladur and juppe subsidized the replacement of old cars with new ones to study this policy we construct a dynamic stochastic discrete choice model of car ownership at the household level the resulting decision rules and equilibrium conditions are used to estimate the underlying parameters of the model using aggregate data these policy functions are used to evaluate the short and long run effects of the french policies we find that these policies do stimulate the automobile sector in the short run but through the induced changes in the cross sectional distribution of car ages create the basis for subsequent low activity further while these policies increase government revenues in the short run revenues in the long run are lower relative to a baseline without intervention

the consumption response to positive and negative income shocks abstract a set of newly added questions in the 2011 2014 bank of england nmg consulting survey reveals that british households tend to change their consumption by significantly more in reaction to temporary and unanticipated falls in income than to rises of the same size household balance sheet characteristics such as high debt to income ratios and small liquidity buffers concerns about credit market access and higher subjective risk of lower future income account for a sizable share of this spending asymmetry our findings have important implications for predicting the response of aggregate consumption to expansionary and contractionary macroeconomic policies

tracing the impact of large minimum wage changes on household welfare in indonesia abstract minimum wage legislation has been introduced and expanded in many developed and developing countries in the hope that it would improve the living standards of the poor and reduce inequality this study examines the impact of large minimum wage changes in indonesia the results indicate serious limitations of the minimum wage for improving living standards and reducing inequality

the local aggregate effects of minimum wage increases using variation in minimum wages across cities and controlling for differences in business cycle factors and long run local economic trends we find that following minimum wage increases both prices and nominal spending rise modestly these gains are larger for certain subcategories of goods such as food away from home and in locations where low wage workers account for a larger share of employment further minimum wage increases are associated with reduced total debt among households with low credit scores higher auto debt and increased access to credit

fiscal stimulus and consumer debt in the aftermath of the consumer debt induced recession policymakers have questioned whether fiscal stimulus is effective during periods of high consumer indebtedness this study empirically inves

the economic effects of a borrower bailout evidence from an emerging market this paper studies the credit market implications and real effects of one the largest borrower bailout programs in history enacted by the government of india against the backdrop of the 2008 2009 financial crisis the study finds that the stimulus program had no effect on productivity wages or consumption but led to significant changes in credit allocation and an increase in defaults post program loan performance declines faster in districts with greater exposure to the program an effect that is not driven by greater risk taking of banks loan defaults become significantly more sensitive to the electoral cycle after the program suggesting the anticipation of future credit market interventions as an important channel through which moral hazard in loan repayment is intensified

adjustment of consumers durables stocks evidence from automobile purchases this paper tests an optimal s s rule in household durable purchases and examines directly the resulting aggregate expenditure dynamics the observed decision rule responds to income uncertainty and growth as predicted by an s s model resulting from transactions costs tests against liquidity constraints find that about half the households purchase according to an optimal s s rule aggregating the s s rule over households produces a cross section distribution of durables holdings the empirical distribution is similar to that predicted theoretically as is its response to aggregate shocks furthermore simulations of aggregate expenditure based on the household distribution exhibit dynamics consistent with those observed in the 1980s

shocks stocks and socks smoothing consumption over a temporary income loss we investigate how households in temporarily straitened circumstances due to an unemploy ment spell cut back on expenditures and how they spend marginal dollars of unemployment insurance ui benefit our theoretical and empirical analyses emphasize the importance of allowing for the fact that households buy durable as well as non durable goods the theoretical analysis shows that in the short run households can cut back significantly on total expenditures without a significant fall in welfare if they concentrate their budget reductions on durables we then present an empirical analysis based on a canadian survey of workers who experienced a job separation exploiting changes in the unemployment insurance system over our sample period we show that cuts in ui benefits lead to reductions in total expenditure with a stronger impact on clothing than on food expenditures our empirical strategy allows that these expenditures may be non separable from employment status the effects we find are particularly strong for households with no liquid assets before the spell started these qualitative findings are in precise agreement with the theoretical predictions jel d11 d12 d91 j65 2009 by the european economic association

uncertainty and consumer durables adjustment we characterize infrequent durables stock adjustment by consumers who also derive utility from non durable consumption flows in the presence of idiosyncratic income uncertainty the data we analyse include subjective future income uncertainty measures which we use as instruments in the estimation of relevant parameters of heterogeneous consumers dynamic adjustment problems the data feature two conceptually distinct sources of variation cross sectional heterogeneity of the sampled households dynamic problems and history dependent heterogeneity in their situation during the observation period we note that the latter should affect the likelihood but not the size of stock adjustment decisions and find broad support for theoretical predictions in formal selection controlled regressions based on this insight

income variance dynamics and heterogeneity recent theoretical work has shown the importance of measuring microeconomic uncertainty for models of both general and partial equilibrium under imperfect insurance in this paper the assumption of i i d income innovations used in previous empirical studies is removed and the focus of the analysis is placed on models for the conditional variance of income shocks which is related to the measure of risk emphasized by the theory we first discriminate amongst various models of earnings determination that separate income shocks into idiosyncratic transitory and permanent components we allow for education and time specific differences in the stochastic process for earnings and for measurement error the conditional variance of the income shocks is modelled as a parsimonious arch process with both observable and unobserved heterogeneity the empirical analysis is conducted on data drawn from the 1967 1992 panel study of income dynamics we find strong evidence of sizeable arch effects as well as evidence of unobserved heterogeneity in the variances

do house prices drive consumption growth the coincident cycles of house prices and consumption in the uk this paper uses a realistic structural lifecycle model of consumption and housing decisions to understand how data might distinguish different mechanisms that explain the correlation between house prices and consumption the model includes price and earnings shocks estimated from data the latter including aggregate and idiosyncratic components and incorporates realistic features of the uk mortgage market we simulate the model using more than 30 years of realized shocks and under counterfactual scenarios our results confirm the intuition of earlier studies house price shocks should have a larger effect on the consumption of older households and earnings shocks on young households