Mental Accounts and Consumption Sensitivity across the Distribution of Liquid Assets

Graham, James; McDowall, Robert A.

doi:10.1257/mac.20220200

Abstract

We study consumption spending responses to predictable income using household-level data from a U.S. financial institution. Even for households with large liquid asset balances, we find no spending in anticipation of income receipt, substantial spending following receipt, and significant front-loading with respect to date of receipt. To rationalize these findings, we develop a tractable model of mental accounts where consumption choices are partitioned across current income and current assets. Our model reproduces the timing, magnitude, and cross-section of consumption responses observed in the data. Finally, we use the model to study the effectiveness of targeted and untargeted fiscal stimulus policies.

蝌蚪网

蝌蚪网 Journal:
Macroeconomics