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Using questions expressly added to the Consumer Expenditure Survey, we estimate the change in consumption expenditures caused by the 2001 federal income tax rebates and test the permanent income hypothesis. We exploit the unique, randomized timing of rebate receipt across households. Households spent 20 to 40 percent of their rebates on nondurable goods during the three-month period in which their rebates arrived, and roughly two-thirds of their rebates cumulatively during this period and the subsequent three-month period. The implied effects on aggregate consumption demand are substantial. Consistent with liquidity constraints, responses are larger for households with low liquid wealth or low income.

We measure the change in household spending caused by receipt of the economic stimulus payments of 2008, using questions added to the Consumer Expenditure Survey and variation from the randomized timing of disbursement. Households spent 12–30 percent (depending on specification) of their payments on nondurable goods during the three-month period of payment receipt, and a significant amount more on durable goods, primarily vehicles, bringing the total response to 50–90 percent of the payments. The responses are substantial and significant for older, lower-income, and home-owning households. Spending does not vary significantly with the method of disbursement (check versus electronic transfer). (JEL D12, D14, E21, E62)