Consumer Response to the Timing of Income: Evidence from a Change in Tax Witholding PDF Download
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Author: Matthew D. Shapiro
Publisher:
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Category :
Languages : en
Pages :
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Author: Matthew D. Shapiro
Publisher:
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Category :
Languages : en
Pages :
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Author: Joel Slemrod
Publisher:
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Category :
Languages : en
Pages :
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In 1992, the income tax withholding tables were adjusted so that withholding was reduced. A typical worker received an extra $28.80 in take-home pay per month in March through December 1992, to be offset by a lower tax refund in 1993. The change in withholding amounted to 0.5 percent of GDP. President Bush, who proposed this change in his State of the Union address, intended that it provide a temporary stimulus to demand. But the policy change involved only the timing of income, so, under the life-cycle/permanent-income model, it would be predicted to have a negligible effect on consumption and aggregate demand. This paper reports consumers' responses to the change in withholding. The results are based on a survey taken shortly after it went into effect. Forty-three percent of consumers report spending the extra take-home pay--substantially more than the zero percent predicted by the standard models, but substantially less than the one hundred percent upon which the policy was predicated. The decision to save the income is not explained by expected income growth. Therefore, while behavior of many households is not fully consistent with the life-cycle/permanent-income model, liquidity constraints do not appear to account for this behavior.
Author: George Katona
Publisher: Greenwood
ISBN:
Category : Business & Economics
Languages : en
Pages : 272
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Author: Cait Lamberton
Publisher: Cambridge University Press
ISBN: 1009243942
Category : Psychology
Languages : en
Pages : 873
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In the last two years, consumers have experienced massive changes in consumption – whether due to shifts in habits; the changing information landscape; challenges to their identity, or new economic experiences of scarcity or abundance. What can we expect from these experiences? How are the world's leading thinkers applying both foundational knowledge and novel insights as we seek to understand consumer psychology in a constantly changing landscape? And how can informed readers both contribute to and evaluate our knowledge? This handbook offers a critical overview of both fundamental topics in consumer psychology and those that are of prominence in the contemporary marketplace, beginning with an examination of individual psychology and broadening to topics related to wider cultural and marketplace systems. The Cambridge Handbook of Consumer Psychology, 2nd edition, will act as a valuable guide for teachers and graduate and undergraduate students in psychology, marketing, management, economics, sociology, and anthropology.
Author: George Loewenstein
Publisher: Russell Sage Foundation
ISBN: 1610443667
Category : Psychology
Languages : en
Pages : 584
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How do people decide whether to sacrifice now for a future reward or to enjoy themselves in the present? Do the future gains of putting money in a pension fund outweigh going to Hawaii for New Year's Eve? Why does a person's self-discipline one day often give way to impulsive behavior the next? Time and Decision takes up these questions with a comprehensive collection of new research on intertemporal choice, examining how people face the problem of deciding over time. Economists approach intertemporal choice by means of a model in which people discount the value of future events at a constant rate. A vacation two years from now is worth less to most people than a vacation next week. Psychologists, on the other hand, have focused on the cognitive and emotional underpinnings of intertemporal choice. Time and Decision draws from both disciplinary approaches to provide a comprehensive picture of the various layers of choice involved. Shane Frederick, George Loewenstein, and Ted O'Donoghue introduce the volume with an overview of the research on time discounting and focus on how people actually discount the future compared to the standard economic model. Alex Kacelnik discusses the crucial role that the ability to delay gratification must have played in evolution. Walter Mischel and colleagues review classic research showing that four year olds who are able to delay gratification subsequently grow up to perform better in college than their counterparts who chose instant gratification. The book also delves into the neurobiology of patience, examining the brain structures involved in the ability to withstand an impulse. Turning to the issue of self-control, Klaus Wertenbroch examines the relationship between consumption and available resources, showing, for example, how a high credit limit can lead people to overspend. Ted O'Donoghue and Matthew Rabin show how people's awareness of their self-control problems affects their decision-making. The final section of the book examines intertemporal choice with regard to health, drug addiction, dieting, marketing, savings, and public policy. All of us make important decisions every day-many of which profoundly affect the quality of our lives. Time and Decision provides a fascinating look at the complex factors involved in how and why we make our choices, so many of them short-sighted, and helps us understand more precisely this crucial human frailty.
Author: Tullio Jappelli
Publisher: Oxford University Press
ISBN: 0199383189
Category : Business & Economics
Languages : en
Pages : 313
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Consumption decisions are crucial determinants of business cycles and growth. Knowledge of how consumers respond to the economic environment and how they react to the risks that they encounter during the life-cycle is therefore important for evaluating stabilization policies and the effectiveness of fiscal packages implemented in response to economic downturns or financial crises. In The Economics of Consumption, Tullio Jappelli and Luigi Pistaferri provide a comprehensive examination of the most important developments in the field of consumption decisions and evaluate economic models against empirical evidence. The first part of the book provides the basic ingredients of economic models of consumption decisions. The central part reviews the empirical literature on the effect of income and wealth changes on consumption and on the relevance of precautionary saving and credit market imperfections. The last chapters extend the basic framework to such important areas as bequests, leisure, lifetime uncertainty, and financial sophistication. Jappelli and Pistaferri shed light on important issues, including how consumption responds to changes in economic resources, how economic circumstances and consumers' characteristics influence behavior, and whether consumption inequality depends on income shocks and their persistence.
Author: Wendy De La Rosa
Publisher:
ISBN:
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Languages : en
Pages :
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Payment timing variations, or variations in the temporal patterns of when income is dispersed (Parsons and Van Wesep 2013), are a fundamental aspect of consumers' finances. However, scant research has focused on how payment timing variations impact consumers' behavior. In my dissertation, I seek to address this research gap by examining two essential sub-factors of payment timing: payment frequency (the number of times a consumer receives income within a given period) and intraweek payday timing (the day of the week in which consumers receive their income). In Chapter 1, I examine the role that payment frequency plays on consumers' spending and subjective wealth perceptions. Payment frequency is a fundamental yet underexplored feature of consumers' finances. As higher payment frequencies are becoming more prevalent, consumers are receiving more frequent yet smaller paychecks. An analysis of income and expenditure data of over 30,000 consumers from a financial services provider demonstrates a naturally occurring relationship between higher payment frequencies and increased spending. A series of lab studies support this finding, providing causal evidence that higher (vs. lower) payment frequencies increase spending. The effect of payment frequency on spending is driven by changes in consumers' subjective wealth perceptions. Specifically, higher payment frequencies reduce consumers' uncertainty in predicting whether they will have enough resources throughout a period, increasing their subjective wealth perceptions. As such, situational factors that reduce prediction uncertainty for those paid less frequently (e.g., the timing of consumers' expenses, income levels) moderate the impact of payment frequency. The effects of payment frequency on subjective wealth and spending can occur even when objective wealth favors those with lower payment frequencies. More broadly, the current work underscores a need to understand how timing variations in consumers' income impact their perceptions, behaviors, and general well-being. In Chapter 2, I examine the role of intraweek payday timing on consumers' spending and deserving justifications. Intraweek payday timing (i.e., the day of the week a consumer receives their paycheck) is a fundamental aspect of consumers' income. While consumers can receive their income on any day of the week, more than half of American workers receive their paychecks on Fridays. Surprisingly, despite the prevalence of Friday paydays, little is known about how this intraweek payday timing affects consumer spending. This research focuses on addressing this research gap and demonstrates that Friday paydays (vs. other paydays) increase consumers' total spending throughout a period. A real-world field study that manipulated the weekly paydays of 178 male Indian laborers demonstrated that a Friday payday (vs. a Monday payday) increased consumers' weekly spending by 20%. We suggest that Friday, which serves as a unique temporal landmark (marking both the beginning of the weekend and the end of the workweek), increases deserving justifications, which drive consumer spending. In line with this theorizing, the effect of a Friday payday was attenuated when Friday was no longer a unique temporal landmark (e.g., when Fridays did not mark the end of their workweek or the start of their weekend). A series of pre-registered experiments replicate the field study findings and suggest that Friday paydays increase consumers' deserving justifications, consequently increasing their spending. Across these chapters, I answer an important outstanding question in both marketing and economics. Do payment timing variations influence consumers' spending behaviors? And if so, how? The data outlined in these chapters demonstrate that payment timing variations influence consumers' perceptions and spending. These findings challenge the assumptions put forth by the Permanent Income Hypothesis (Friedman 1957), suggesting that absent any liquidity constraints, payment timing variations should not impact consumer spending. I hope that these chapters help generate new research into how different resource timing variations impact consumers. In these chapters, I analyze two types of payment timing variations (payment frequency and intraweek payday timing). Future research should focus on other payment timing variations such as income volatility (the variance in a consumers' income within a given period) or advance versus in arrears payments. Furthermore, these chapters focus on one type of consumer behavior: spending. It is important to understand the long-term impacts of these payment timing variations on other types of financial behaviors, including savings, investing, borrowing, and lending. Finally, future research might consider how the timing of other types of resources (e.g., time) impacts consumers' perceptions. Indeed, a pilot study suggests that consumers believe they have more leisure time when they receive smaller amounts of leisure time daily compared to larger amounts of leisure time once a week (see appendix O for more details). In sum, the current work underscores the need to understand the impact of different resource timing variations on consumers' perceptions, behaviors, and general well-being. Chapter 1 (De La Rosa and Tully 2021) was published in the Journal of Consumer Research. Chapter 2 (De La Rosa, Turner, Aaker and Mishra) is under review at the Journal of Consumer Research. I am the first author in each of these essays. Each chapter employs the use of first-person plural pronouns to emphasize the critical contributions made by my collaborators.
Author: Anthony C. Infanti
Publisher: NYU Press
ISBN: 1479800392
Category : Law
Languages : en
Pages : 267
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How tax law perpetuates injustice but might instead be used as a powerful force for creating a more just and equitable society The relationship between tax law and society, Anthony C. Infanti asserts, is too often overlooked by those who work outside of the field of fiscal policy. Yet, the way a country collects and spends its revenue can be viewed as a quantifiable reflection of how a country sees itself, sending messages about both what it values now and what it aspires to be in the future. Tax and Time sheds light on two of the most misunderstood universal human experiences: time and taxes. Anthony C. Infanti asserts that time in tax law is the product of pure imagination and calls into question the world beyond time that we have created for ourselves. Written with clarity and powerful insight, Tax and Time demonstrates how the tax laws have been used to imaginatively manipulate time in ways that perpetuate economic and social injustice. With its social justice focus, the book brings a sorely needed critical perspective to technical tax policy discussions. Infanti calls for a systematic reexamination and reworking of the relationship between time and tax law, asserting that the power of the legal imagination to manipulate time in tax law can both correct past injustices and help us to envision—and actually work toward—a better and more just society.
Author: N. Gregory Mankiw
Publisher: Macmillan
ISBN: 1429253673
Category : Business & Economics
Languages : en
Pages : 642
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Watch this video interview with Greg Mankiw and Larry Ball discussing the future of the intermediate macroeconomics course and their new text. Check out preview content for Macroeconomics and the Financial System here. The financial crisis and subsequent economic downturn of 2008 and 2009 was a dramatic reminder of what economists have long understood: developments in the overall economy and developments in the financial system are inextricably intertwined. Derived and updated from two widely acclaimed textbooks (Greg Mankiw’s Macroeconomics, Seventh Edition and Larry Ball’s Money, Banking, and the Financial System), this groundbreaking text is the first and only intermediate macroeconomics text that provides substantial coverage of the financial system.
Author: United States. Congress. Senate. Committee on Finance
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 168
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