The textbook version of the life-cycle permanent income hypothesis with no liquidity constraints predicts that consumption should react very little to transitory shocks to income and very strongly to permanent shocks. This prediction has important policy implications, i.e., to understand the response of consumers to tax rebates or increases that are made for stabilization purposes. In recent years there has been a resurgence of interest in estimating these important parameters, either using quasi-experimental data (such as randomization of the timing when tax rebate checks are received by households, see Christian Broda and