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Spending Responses to High-Frequency Shifts in Payment Timing: Evidence from the Earned Income Tax Credit†

Spending Responses to High-Frequency Shifts in Payment Timing: Evidence from the Earned Income... AbstractThis 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. (JEL D12, E32, G51, H24, I38, K34) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal Economic Policy American Economic Association

Spending Responses to High-Frequency Shifts in Payment Timing: Evidence from the Earned Income Tax Credit†

26 pages

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References (44)

Publisher
American Economic Association
Copyright
Copyright © 2023 © American Economic Association
ISSN
1945-7731
DOI
10.1257/pol.20200590
Publisher site
See Article on Publisher Site

Abstract

AbstractThis 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. (JEL D12, E32, G51, H24, I38, K34)

Journal

American Economic Journal Economic PolicyAmerican Economic Association

Published: Aug 1, 2023

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