taxes withheld during several months or by receiving shopping coupons at once. The question of whether a tax cut or coupon program is more effective is an important one for macroeconomic policy makers, in addition to being of interest to academics.

Hori, Hsieh, Murata and Shimizutani (2002) demonstrates that the coupon program stimulated consumption of semi-durables right after the coupons were distributed, particularly consumption of apparel and services. The MPC on these semi-durables is estimated to be 0.3-0.4 after the coupons were distributed, but the estimated elasticity (and the MPC) declines to 0.1 over longer time periods. On the contrary, the results in this paper show that the 1998 tax cut on consumption and finds that consumers responded to the 1998 tax cut with the implied MPC to current tax cut benefit of 0.6 but again the MPC declined in subsequent months. Consumers spent the tax cut benefits on services, not on semi-durables as in the shopping coupons program. In other words, both fiscal policies had roughly comparable effects on consumption, but the 1998 tax cut and the coupon program affected consumption of different types of goods. There are several possible explanations for this different pattern of expenditure across different policies. First, the amount of benefit is clearer and easier to calculate when a household receives it by getting coupons rather than by decreasing withheld taxes. Second, coupons in the program expire after six months while money does not expire for the tax cut case. Third, households receive coupons all at once but the benefits of the 1998 tax cut are spread over several months. $ ^{26} $ These differences in form seem to have influenced households to receive and spend their windfall gain from the coupon program earlier and on more expensive items than in the 1998 tax cut case. In addition, coupons were spent for items such as clothing that benefited children perhaps because the amount of coupons received was based on the number of children and families may have faced psychological pressure to spend the coupons on items for their children. This is not true in the case of the 1998 tax cuts.

To compare the effects of both fiscal policies using the same specification, we employ the following three specifications to assess the effect of the shopping coupon program. Although the amount of the tax cut benefit for individual households in each month is calculated as discussed above, it is impossible to identify when an eligible household received a coupon from the FIES data, which makes it hard to apply the specifications utilized above to the coupon program case. The basic idea is to regress in change in logs of consumption between January and each month on the tax cut amount a household received up until the month normalized by monthly income or consumption in the first month, which is characterized as the month-to-month specification.

$$ \begin{aligned}\ln\left(\frac{C_{h,t+1(t=1,2,3,4,5)}}{C_{h,t}}\right)&=a_{1}\cdot\left(\frac{CUMTaxcut_{h,t+1}}{Monthly Income_{h}}\right)+a_{2}\cdot\left(\frac{TaxcutI_{h,6}}{Monthly Income_{h}}\right)\\&+a_{3}\cdot\left(\frac{Other_{h,t}}{MonthlyIncome_{h}}\right)+Z_{h,t}{}^{^{\prime}}\cdot a_{4}+Month_{t}{}^{^{\prime}}\cdot a_{5}+\pounds_{t+1}\end{aligned} $$