Household Responses to Fiscal News Shocks

Last registered on November 29, 2024

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Pre-Trial

Trial Information

General Information

Title

Household Responses to Fiscal News Shocks

RCT ID

AEARCTR-0014835

Initial registration date

November 18, 2024

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

November 19, 2024, 3:57 PM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated

November 29, 2024, 4:44 AM EST

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country

Germany

Region

North Rhine-Westphalia

Primary Investigator

Name

Nils Blossey

Affiliation

University of Cologne

Contact Primary Investigator

Other Primary Investigator(s)

PI Name

Adrian Schröder

PI Affiliation

University of Münster

Contact Investigator

Additional Trial Information

Status

In development

Start date

2024-12-02

End date

2024-12-23

Keywords

Behavior

Additional Keywords

Government spending, fiscal policy, expectation formation, mental models

JEL code(s)

Secondary IDs

Prior work

This trial does not extend or rely on any prior RCTs.

Abstract

We examine the effects of government spending on household consumption and macroeconomic expectations through an information provision experiment. We experimentally shift expectations about the growth of government consumption and investment spending using forecasts from the Survey of Professional Forecasters. First, we examine the quality of households' fiscal expectations compared to professional forecasters and evaluate the extent to which households update their expectations upon receiving information about the expected fiscal stance. Second, we estimate the impact of the fiscal news shock on the intra-individual change between past household consumption in 2024 and expected household consumption in 2025. Additionally, we analyze qualitative changes in consumer behavior and income expectations. We then explore whether households associate the fiscal news shock with inflation and increased taxation in both the short and long run. Finally, we use open-ended questions to explore how individuals relate the fiscal stance to their own economic behavior and expectations. We use a follow-up survey to ascertain whether the effects persisted over time.

External Link(s)

Registration Citation

Citation

Blossey, Nils and Adrian Schröder. 2024. "Household Responses to Fiscal News Shocks." AEA RCT Registry. November 29. https://doi.org/10.1257/rct.14835-1.1

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Experimental Details

Interventions

Intervention(s)

We experimentally shift respondents' fiscal expectations by presenting them with varying information about government spending growth in 2025 relative to 2024, calibrated using data from the Survey of Professional Forecasters. The treatment group receives information about the upper bound of spending growth among professional forecasters, while the active control group is presented with information about a neutral fiscal stance, calibrated as the lowest positive growth rate.

Intervention Start Date

2024-12-02

Intervention End Date

2024-12-11

Primary Outcomes

Primary Outcomes (end points)

Household consumption growth

Primary Outcomes (explanation)

Household consumption growth is computed as the percentage change between the annualized values of planned (and expected) average monthly spending on all goods and services in 2024 and 2025. We use the expected inflation rate in 2025 to compute real instead of nominal consumption growth. We also capture the qualitative changes in total household consumption and its various components in the posterior block. We allow respondents to elaborate on their expected changes in consumer spending in an open-ended question.

Secondary Outcomes

Secondary Outcomes (end points)

Tax expectations, inflation rate, income expectations

Secondary Outcomes (explanation)

We measure tax expectations as the expected qualitative change in the personal income tax rate in the next 12 months (short-run) and over the next 5 years (long-run). We elicit individual expectations about the inflation rate in percent as a numerical value. We elicit income expectations as the qualitative change in household gross income in 2025 compared to 2024. Finally, we allow respondents to elaborate on their personal income tax expectations and their general understanding of the relationship between government spending and their own economic decisions in two open-ended questions.

Experimental Design

Our experimental design is structured as follows: We first elicit respondents' beliefs about the 2024 government spending growth rate and then provide the actual projected growth rate (SPF 2024:IV) as an anchor. Second, we elicit prior expectations about the expected growth rate of government spending on investment and consumption for the upcoming year, 2025. Third, respondents receive varying information about the spending growth rate from the SPF. The treatment group receives information calibrated with the upper bound of professional spending forecasts, while the active control group receives information about the growth rate calibrated as the lowest positive growth rate.

Experimental Design Details

Not available

Randomization Method

Randomization is done by the computer.

Randomization Unit

Individual

Was the treatment clustered?