Working Paper #2011-10 – Did the 2008 Rebate Fail? A Response to Taylor and Feldstein

Department of Economics
University of Delaware
Working Paper #2011-10

Did the 2008 Rebate Fail? A Response to Taylor and Feldstein

Kenneth A. Lewis and Laurence S. Seidman

ABSTRACT

Did the 2008 rebate fail to stimulate consumer spending?  In their influential AER articles, John Taylor and Martin Feldstein each claim that BEA aggregate time series data show that the 2008 rebate failed.  Re-examining the BEA data, we find that the data instead show there is a high probability that the rebate stimulated consumption.  Moreover, the hypothesis that a rebate has half the impact of ordinary disposable income cannot be rejected.  Thus, we find that analysis of the BEA aggregate time series data is consistent with the conclusion from the micro-data studies that the 2008 rebate stimulated consumer spending.

JEL Codes:E62

Keywords:  fiscal policy, fiscal stimulus, tax rebates