Asymmetric Consumption Smoothing
Name
aer.20181735.pdf
Description
Published version
Size
996.75 KB
Format
Adobe PDF
Checksum (MD5)
916a276d39142e7274625b82c83aaed8
Author(s)
Baugh, Brian
Ben-David, Itzhak
Park, Hoonsuk
Parker, Jonathan A
Date Issued
2021
Journal
American Economic Review
Publisher
American Economic Association
Version
Final published version
Abstract
© 2021 American Economic Association. All rights reserved. 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.
MIT Department
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1257/aer.20181735
