Matthew Shapiro was interviewed on NPR's Marketplace concerning the effects of government shutdowns. The episode, "Government shutdowns are never good for the economy," cited his study, “How Individuals Smooth Spending: Evidence from the 2013 Government Shutdown Using Account Data.”
The study was coauthored by Michael Gelman (U-M Economics PhD ’17, Claremont McKenna College), Shachar Kariv (University of California, Berkeley), Dan Silverman (Arizona State University), and Steven Tadelis (University of California, Berkeley).
Shapiro and his coauthors have studied how government workers coped with their missed paycheck during the 2013 government shutdown.
Using comprehensive account records, this paper examines how individuals adjusted spending and saving in response to a temporary drop in income due to the 2013 U.S. government shutdown. The shutdown cut paychecks by 40% for affected employees, which was recovered within 2 weeks. Because it affected only the timing of payments, the shutdown provides a distinct experiment allowing estimates of the response to a liquidity shock holding income constant. Spending dropped sharply implying a naïve estimate of the marginal propensity to spend of 0.58. This estimate overstates how consumption responded. While many individuals had low liquidity, they used multiple strategies to smooth consumption including delay of recurring payments such as mortgages and credit card balances.
"How Individuals Smooth Spending: Evidence from the 2013 Government Shutdown Using Account Data." by Michael Gelman, Shachar Kariv, Matthew D. Shapiro, Dan Silverman, and Steven Tadelis. February 2015. Revised December 2016.