"Anticipation and Consumption" - Neil Thakral, Brown University (joint with Princeton Behavioral Economics Group)

Date
Mar 1, 1:20 pm2:35 pm
Location
Zoom
Speaker
Event Description

Neil Thakral is the Nancy Donohue and Diane Elam Assistant Professor of International and Public Affairs and Economics at the Watson Institute of International and Public Affairs at Brown University.

Abstract

This paper introduces a model of how the timing of information affects consumption decisions and tests its predictions in both developed and developing contexts. In our model, consumers form intertemporal plans and experience utility from anticipating future consumption. The model predicts excess sensitivity of spending to receiving a windfall, with smaller spending responses when there is more time to anticipate receiving the payment. The prediction that waiting leads to more patient decisions does not depend on whether consumers are liquidity constrained. Using Nielsen Consumer Panel data, we find higher marginal propensities to spend for households scheduled to receive the 2008 Economic Stimulus Payments sooner. Using data from randomized experiments in Kenya and Malawi, we find higher savings and assets among households scheduled to wait longer before receiving lump-sum unconditional cash transfers. Finally, we discuss existing evidence on how consumption responds to gains, losses, and news in light of our model.