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This study explores how shifts in the timing of large lump-sum payments to households affect
spending. Using a novel data set combining daily, state-level measures of retail sales with IRS
administrative data on tax refund issuance, we exploit plausibly exogenous, high-frequency
variation across states in the timing of tax refunds to households claiming the Earned Income
Tax Credit, particularly variation resulting from the 2017 PATH Act. Retail spending increases
by 27 cents per refund dollar, implying an extra $1,150 of spending associated with the average
refund within just two weeks of issuance. Results show non-durable and services expenditures
increase along with durables, suggesting a considerable consumption response to the two-week
shift in the timing of a large, predictable payment. Our results, which provide a lower bound on
spending out of lump-sum payments, are informative for the efficacy of lump-sum transfers,
including stimulus payments made during the recent recession.
