We document a large increase in the cyclicality of the incomes of high-income households, coinciding with the rise in their share of aggregate income. In the United States, since top income shares began to rise rapidly in the early 1980s, incomes of those in the top 1 percent of the income distribution have averaged 14 times average income and been 2.4 times more cyclical. Before the early 1980s, incomes of the top 1 percent were slightly less cyclical than average. The increase in cyclicality at the top is to a large extent due to increases in the share and the cyclicality of their earned income. The high cyclicality among top incomes is found for households without stock options; following the same households over time; for post-tax, post-transfer income; and for consumption. We study cyclicality throughout the income distribution and reconcile our findings with earlier work. Furthermore, greater top income share is associated with greater top income cyclicality across recent decades, across subgroups of top income households, and, in changes, across countries. This suggests a common cause. We show theoretically that increases in the production scale of the most talented can raise both top incomes and their cyclicality.

We measure the response of household spending to the economic stimulus payments (ESPs) disbursed in mid-2008, using special questions added to the Consumer Expenditure Survey and variation arising from the randomized timing of when the payments were disbursed. We find that, on average, households spent about 12-30% (depending on the specification) of their stimulus payments on nondurable expenditures during the three-month period in which the payments were received. Further, there was also a substantial and significant increase in spending on durable goods, in particular vehicles, bringing the average total spending response to about 50-90% of the payments. Relative to research on the 2001 tax rebates, these spending responses are estimated with greater precision using the randomized timing variation. The estimated responses are substantial and significant for older, lower-income, and home-owning households. We further extend the literature in two ways. First, we find little evidence that the propensity to spend varies with the method of disbursement (paper check versus electronic transfer). Second, we evaluate a complementary methodology for quantifying the impact of tax cuts, which asks consumers to self-report whether they spent their tax cuts. The response of spending to the ESPs is indeed largest for self-reported spenders. However, self-reported savers also spent a significant fraction of the payments.

In the summer of 2003, the US government mailed around $14 billion in child tax credit payments to millions of households. Using special questions added to the Consumer Expenditure Survey, we estimate the change in consumption expenditures caused by receipt of these payments, by comparing the spending of households that receive payments in a given period to the spending of those that do not. On average, households spent about a quarter of their payments on nondurable consumption goods during the three-month period in which the payments were received. There is also less precisely estimated evidence of an ongoing but smaller response in the subsequent three-month period, so that roughly one-third of the payment was spent cumulatively during the quarter of receipt and subsequent three-month period. These responses are larger for households with relatively low liquid wealth or low income, which is consistent with their facing binding liquidity constraints.