Ulric B. and Evelyn L. Bray Social Sciences Seminar

Monday, February 22, 2021
12:00pm to 1:00pm
Add to Cal
Online Event
Anticipation and Consumption
Neil Thakral, Nancy Donohue and Diane Elam Assistant Professor of International and Public Affairs and Economics, 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.

For more information, or if you are interested in attending this online seminar, please contact Letty Diaz by email at letty.diaz@caltech.edu.