CONSUMPTION TAX CUTS IN A RECESSION

• 成果类型: Article
• 署名作者: Parodi, Francesca
• 署名单位: Catholic University of the Sacred Heart; Centre for Economic Policy Research - UK; Catholic University of the Sacred Heart
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.1111/iere.12661
• 发表日期: 2024
• 页码: 117-148
• 关键词: life-cycle; Consumer durables; DYNAMICS; POLICY; sales; uncertainty; reforms; demand; shocks; MARKET

摘要

I study the effectiveness of temporary cuts to consumption tax rates as fiscal stimulus instruments during recessions using a structural life-cycle model with multiple consumption categories. I find tax elasticities of 0.4 for nondurable luxuries and of 10.5 for durables. I show that the tax cut on nondurables has an intratemporal substitution effect, whereas the tax cut on durables acts through an intertemporal substitution mechanism that is stronger for high-income, liquidity-unconstrained, and younger households. This mechanism is amplified in less persistent recessions and dampened in absence of recessions due to durables' partial irreversibility and precautionary saving motives.