The Impact of the 1972 Social Security Benefit Increase on Household Consumption

This paper examines the consumption response to the 1972 Social Security benefit increase. Nominal benefits were increased by 20 percent while annual cost of living adjustments (COLAs) were contemporaneously implemented and scheduled to begin in less than three years. Taken in isolation, this benefit increase could be viewed as a large and permanent increase in real Social Security benefits. However, the prevailing high rates of inflation that were the impetus for the COLA legislation may have caused households to view the permanent real benefit increase to be substantially less than 20 percent. Using data from the 1972-73 Survey of Consumer Expenditures, the results provide a mixed picture of the consumption impact of the benefit increase. Strictly nondurable consumption increases significantly at the time of the benefit increase. However, this increase does not persist. Furthermore, the likelihood of making any purchases from an array of durable good categories does not change throughout this period.

Paycheck Receipt and the Timing of Consumption

This paper examines the consumption response to monthly paycheck receipt. Since the amount and arrival date of paychecks are known in advance, the receipt of a paycheck does not coincide with the receipt of new information. Under the basic rational expectations Life-Cycle/Permanent Income Hypothesis, household consumption should not respond to paycheck arrival. Using data from the United Kingdom's Family Expenditure Survey, this paper finds that household consumption is excessively sensitive to paycheck receipt. The results cannot be explained by any underlying monthly expenditure fluctuations common to all households. The presence of liquidity constraints as measured by wealth can account for the excess sensitivity results although the availability of credit cards cannot.

The Impact of Separate Taxation on the Intra-Household Allocation of Assets: Evidence from the UK

The income tax system in the United Kingdom moved from joint to independent taxation of husbands' and wives' income in 1990. One interesting aspect of independent taxation is the ability for households to choose the division of household assets between the two spouses. This tax reform therefore creates an opportunity for households to engage in a form of tax avoidance by shifting their investment income to the spouse with the lower marginal tax rate. We use Family Expenditure Survey data to examine the impact of this tax reform on the magnitude of investment income shifting between spouses with different marginal tax rates. We find a sizeable shift in the share and incidence of asset income claimed by wives, who typically have lower marginal tax rates, as well as in the incidence of the wife claiming all the household asset income, indicating that households responded to this policy change by reallocating asset ownership.

Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations

Previous research finds a systematic decrease in consumption at retirement, a finding that is inconsistent with the Life-Cycle/Permanent Income Hypothesis if retirement is an expected event. In this paper, we use workers' subjective beliefs about their retirement dates as an instrument for retirement. After demonstrating that subjective retirement expectations are strong predictors of subsequent retirement decisions, we still find a retirement consumption decline for workers who retire when expected. However, our estimates of this consumption fall are about a third less than those found when we instead rely on the instrumental variables strategy used in prior studies. Finally, we examine a number of hypotheses that have been put forward to explain the retirement consumption decline. We find little empirical support for these explanations in our data.

Job Displacement, Disability, and Divorce

This paper examines how job displacement and physical disability suffered by a spouse affects the probability that the person's marriage ends in divorce. According to the standard economic model of marriage, the arrival of new information about a partner's earning capacity that a negative earnings shock conveys might affect the gains that the couple believes it will receive from remaining married. Shocks may therefore affect divorce probability. Little previous work has explored this issue. The few efforts that exist use no explicit measures of earning shocks. Using the Panel Study of Income Dynamics, this paper finds an increase in the probability of divorce following a spouse's job displacement but no change in divorce probability after a spousal disability. This difference casts doubt on a purely pecuniary motivation for divorce following earnings shocks, since both types of shocks exhibit similar long-run economic consequences. Furthermore, the increase in divorce is found only for layoffs and not for plant closings which suggests that information conveyed about a partner's non-economic suitability as a mate due to a job loss may be more important than the financial losses in precipitating a divorce.

Worker Displacement and the Added Worker Effect

This paper examines the effect of a husband's job loss on the labor supply of his wife, an effect known as the 'added worker' effect. Unlike past added worker effect studies which focus on the effect of the husband's current unemployment status, this paper analyzes the wife's labor supply response in the periods before and after her husband's job displacement in order to examine the short- and long-run adjustments to an earnings shock. Using the Panel Study of Income Dynamics, small pre-displacement effects are found along with larger and persistent post-displacement effects. The timing of the wives' responses differs by the type of displacement (plant closing vs. permanent layoff), possibly due to differences in the information wives acquire prior to the displacement. In addition, the response is found to increase with the magnitude of the husband's wage loss, to have changed over time (70's vs. 80's) and to vary by the husband's pre-displacement earnings. The long-run increases in the wife's labor supply account for over 25% of the husband's lost income.

Effects of Selective Deletion of Tyrosine Hydroxylase from Kisspeptin Cells on Puberty and Reproduction in Male and Female Mice.

The neuropeptide kisspeptin, encoded by Kiss1, regulates reproduction by stimulating GnRH secretion. Kiss1-syntheizing neurons reside primarily in the hypothalamic anteroventral periventricular (AVPV/PeN) and arcuate (ARC) nuclei. AVPV/PeN Kiss1 neurons are sexually dimorphic, with females expressing more Kiss1 than males, and participate in estradiol (E2)-induced positive feedback control of GnRH secretion. In mice, most AVPV/PeN Kiss1 cells coexpress tyrosine hydroxylase (TH), the rate-limiting enzyme in catecholamine synthesis (in this case, dopamine). Dopamine treatment can inhibit GnRH neurons, but the function of dopamine signaling arising specifically from AVPV/PeN Kiss1 cells is unknown. We generated a novel TH flox mouse and used Cre-Lox technology to selectively ablate TH specifically from Kiss1 cells. We then examined the effects of selective TH knock-out on puberty and reproduction in both sexes. In control mice, 90% of AVPV/PeN Kiss1 neurons coexpressed TH, whereas in mice lacking TH exclusively in Kiss1 cells (termed Kiss THKOs), TH was successfully absent from virtually all Kiss1 cells. Despite this absence of TH, both female and male Kiss THKOs displayed normal body weights, puberty onset, and basal gonadotropin levels in adulthood, although testosterone (T) was significantly elevated in adult male Kiss THKOs. The E2-induced LH surge was unaffected in Kiss THKO females, and neuronal activation status of kisspeptin and GnRH cells was also normal. Supporting this, fertility and fecundity were normal in Kiss THKOs of both sexes. Thus, despite high colocalization of TH and Kiss1 in the AVPV/PeN, dopamine produced in these cells is not required for puberty or reproduction, and its function remains unknown

Job Loss Expectations, Realizations, and Household Consumption Behavior

Although the theoretical importance of expectations in decision-making is well-known to economists, only a few empirical papers investigate the impact of individual subjective expectations on economic outcomes. This paper examines the link between expectations of future job losses and the subsequent impact that these expectations have on household consumption behavior. The first part of the paper documents the empirical relationship between job loss expectations and subsequent job losses. Subjective job loss expectations have significant predictive power in explaining future job losses even when standard demographic information known to be associated with the prevalence of job displacement is included in the analysis. Furthermore, higher subjective job loss probabilities are correlated with an increased expectation of future earnings declines. Overall, these results indicate that the subjective job loss expectations variable is a meaningful predictor of subsequent displacement. Since a job displacement results in large and persistent earnings losses, job loss expectations should have an important impact on household consumption smoothing following a job loss. The second part of the paper finds that although a job loss significantly reduces household consumption, there is little evidence that the degree to which households anticipate job losses reduces the impact of displacement on consumption. Alternative models of interpreting responses to expectations questions and of household consumption behavior that may explain these results are discussed.

Child Benefit Payments and Household Wealth Accumulation

Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/115934/1/jere12078.pd

The Consumption Response to Seasonal Income: Evidence from Japanese Public Pension Benefits

Japanese public pension benefits, which were distributed quarterly through February 1990 and every other month since then, induce substantial but predictable income fluctuations. The relative magnitude of the payments combined with the delay between payments yields a stronger test of the Life-Cycle/Permanent Income Hypothesis than in prior studies. Applying two identification strategies to monthly household panel data, we find that consumption significantly responds to quarterly benefit receipt. Additional analysis suggests that our findings cannot be explained by either liquidity constraints or precautionary savings motives.