Asymmetric Consumption Smoothing

Abstract

Analyzing account-level data from an account aggregator, we find that households increase consumption when they receive expected tax refunds, as if they face liquidity constraints. However, these same households smooth consumption when making payments in other years, primarily by transferring funds among liquid accounts. Even households carrying credit card debt smooth consumption when making payments, and even highly liquid households spend out of refunds. This behavior is inconsistent with pure liquidity constraints or hand-to-mouth behavior and is most consistent with a mental accounting life-cycle model. (JEL D12, E21, G51, H24, H31)

Consumer Spending during Unemployment: Positive and Normative Implications

“…We fill this gap using the SvW generalization of the Baily-Chetty formula and find that duration extensions have consumption-smoothing gains that are four times larger than level increases. Implementing equation (10) indicates that welfare is 0.082 percent higher under a one-month benefit duration extension, which is four times larger than the gains from level increases discussed in the previous paragraph. This result is not driven by our choice of the risk aversion parameter.…”

“…Mean spending on nondurables in JPMCI is 139 percent of the CE Survey benchmark and 66 percent of the PCE benchmark. 10 For comparable durables, JPMCI is 31 percent of CE Survey and 24 percent of PCE.…”

“…receive this benefit extension) cexhaust using our estimate for average consumption in the first month of exhaustion in Figure 2. Equation (2) in SvW shows that the welfare gain from this potential benefit duration extension can be approximated as (10) dW…”

“…See online Appendix C for an explanation of the "miscellaneous nondurables" category, which accounts for 5 percent of checking outflows 9. In a robustness check in online Appendix E.1, we construct a measure of nondurable spending which assumes that all uncategorized spending (including cash) is spent on nondurables in proportion to that payment method's nondurable expenditure share in the DCPC 10. It is well known that the CE Survey understates consumption expenditures Passero, Garner, and McCully (2014).…”

Wealth at Birth and its Effect on Child Academic Achievement

“…The consequences of these disparities in wealth for child educational achievement may be significant (Sherraden 1991). Wealth is available to the family to use when there are unplanned changes in income and consumption, for example, because of illness or the loss of job (Baugh et al 2021;Bloemen & Stancanelli 2005;Gruber 2001). Wealth is also available to fund planned investments in children's educational achievement, for example, by choosing a residence in a high-cost area with good schools, or for paying for college.…”