American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Spending Responses to High-Frequency Shifts in Payment Timing: Evidence from the Earned Income Tax Credit
American Economic Journal: Economic Policy
vol. 15,
no. 3, August 2023
(pp. 89–114)
Abstract
This study explores the spending response to tax refunds for Earned Income Tax Credit recipients using a novel dataset combining transaction-based measures of retail spending with administrative IRS data on tax refunds. Our dataset allows us to exploit variation in the timing of EITC refunds, including changes related to the 2017 PATH Act, along with cross-state differences in refund magnitudes to identify spending responses. Results show EITC recipients spend about $0.30 per refund dollar ($1,150 for the average refund) within just two weeks of issuance, suggesting stimulus targeted at this population may provide a quick boost to aggregate demand.Citation
Aladangady, Aditya, Shifrah Aron-Dine, David Cashin, Wendy Dunn, Laura Feiveson, Paul Lengermann, Katherine Richard, and Claudia Sahm. 2023. "Spending Responses to High-Frequency Shifts in Payment Timing: Evidence from the Earned Income Tax Credit." American Economic Journal: Economic Policy, 15 (3): 89–114. DOI: 10.1257/pol.20200590Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- E32 Business Fluctuations; Cycles
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
- K34 Tax Law
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