@article{bf5a2022d1de4255975071ca884ba141,
title = "How individuals respond to a liquidity shock: Evidence from the 2013 government shutdown",
abstract = "Using comprehensive account records, this paper examines how individuals adjusted spending and saving in response to a temporary drop in liquidity due to the 2013 U.S. government shutdown. The shutdown cut paychecks by 40% for affected employees, which was recovered within 2 weeks. Because the shutdown affected only the timing of payments, it provides a distinctive experiment allowing estimates of the response to a liquidity shock holding income constant. Spending dropped sharply, implying a na{\"i}ve estimate of 58 cents less spending for every dollar of lost liquidity. This estimate overstates the consumption response. While many individuals had low liquid assets, they used multiple sources of short-term liquidity to smooth consumption. Sources of short-term liquidity include delaying recurring payments such as for mortgages and credit card balances.",
keywords = "Account data, Consumption, Fiscal policy, Liquidity, Marginal propensity to spend, Naturally-occurring data, Spending",
author = "Michael Gelman and Shachar Kariv and Shapiro, {Matthew D.} and Daniel Silverman and Steven Tadelis",
note = "Funding Information: Most federal employees (88%) are employees of Cabinet Level Agencies such as the Department of Defense (DoD), the Department of Veterans Affairs (DVA), and the Department of Energy (DoE). The rest are employees of Independent Agencies such as the Environmental Protection Agency (EPA) or the Social Security Administration. We are able to identify employees who are paid via direct deposit by capturing the transaction description of their recurring paychecks. Federal employees have the text “FED SAL” included in their transaction description. In total, we observe 12,573 users who we believe to be employed by the federal government during the time of the shutdown. Our data set identifies roughly 0.4% of the U.S. population over 18 (1000,000/241,780,000). Since the Financial App population over samples younger working Americans, an upper bound would be an identification rate of 0.7% (1000,000/144,303,000). Therefore, we would expect to observe between 8400 and 14,700 federal employees. Our figure of 12,576 falls within this range. The transaction description also contains details about which federal organization the employee works for. Sometimes the description will list the department that the employee works for but there are cases where the description only lists the agency that processes the payroll of federal employees. There are four main agencies that process the payroll of federal employees. The largest agency is the Defense Finance and Accounting Service (DFAS) which provides payroll service for defense related departments such as the DoD and the DVA. However, they also service non-defense related organizations such as the EPA and the DoE. DFAS pays about 54% of federal employees. The second largest payroll service is the National Finance Center (NFC) which started off only servicing the Department of Agriculture but subsequently expanded to over 170 organizations including the Department of Commerce, Department of Justice, Federal Bureau of Investigation, and the Congressional Budget Office. NFC pays about 31% of federal employees. We are unable to distinguish between departments paid by the NFC because they all use the keyword “AGRI.” The third largest service is the Interior Business Center (IBC) which started off supporting the Department of Interior (DoI) but expanded to service other agencies such as the Department of Transportation (DoT), and the National Science Foundation. The IBC services around 7% of federal employees. We are able to identify employees working for institutions serviced by the IBC such as the Department of Interior (DoI) and the Department of Transportation (DoT). Lastly, the General Service Administration (GSA) services many non-cabinet level agencies such as the Office of Personnel Management and the Railroad Retirement Board. The following table compares the fraction of employees employed in each agency in our data compared to the U.S. population for the largest agencies. The distribution of employees identified in the Financial App data roughly matches the U.S. population. Table A2 Fraction of employees in each agency. Table A2 Financial App data U.S. population DFAS (DoD, DVA, etc.) 46% 54% National Finance Center (DoJ, DoA, DoL, etc.) 34% 31% Department of Interior 2% 3% Department of Transportation 4% 3% Department of State 1% 1% Notes : The fractions for the Financial App data are calculated as the number of users under each agency divided by the total number of users identified as having the keyword “FED SAL” in a paycheck received in either September or October 2013. We are not able to further identify agencies under DFAS and NFC. Appendix H Funding Information: A previous version of this paper was circulated under the title “How Individuals Smooth Spending: Evidence from the 2013 Government Shutdown Using Account Data.” We thank Kyle Herkenhoff, Patrick Kline, Dimitriy Masterov, Melvin Stephens Jr., and Jeffrey Smith as well as participants at many seminars for helpful comments. We are also grateful to the editor and three referees for thoughtful comments on an earlier draft. This research is supported by a grant from the Alfred P. Sloan Foundation (G-2014-13618). Shapiro acknowledges additional support from the Michigan node of the NSF-Census Research Network (NSF SES 1131500). Publisher Copyright: {\textcopyright} 2018",
year = "2020",
month = sep,
doi = "10.1016/j.jpubeco.2018.06.007",
language = "English (US)",
volume = "189",
journal = "Journal of Public Economics",
issn = "0047-2727",
publisher = "Elsevier",
}