The Impact of Government Transfer Payment Frequency on Consumption: Evidence from Delayed UI

Michael Gelman, Zachary Orlando () and Dhiren Patki
Additional contact information
Zachary Orlando: https://econ.wisc.edu/staff/orlando-zachary/

No 24-16, Working Papers from Federal Reserve Bank of Boston

Abstract: We study how the frequency of government transfer payments affects spending behavior. Our empirical approach uses transaction-level data on income and spending and exploits quasi-random delays in the receipt of unemployment insurance (UI) benefits. Spending drops by about half of the loss in income that occurs while individuals wait for UI benefits, revealing the value of periodic payments for liquidity-constrained individuals. Once delayed payments are received as lump sums, individuals reallocate spending toward less commonly purchased big-ticket categories that are dominated by durables. Our findings suggest that transfer programs with mixed frequencies, such as advance disbursements of lump-sum tax credits, can be beneficial to recipients.

Keywords: consumption smoothing; unemployment benefits; liquidity shocks (search for similar items in EconPapers)
JEL-codes: E21 H31 H53 (search for similar items in EconPapers)
Pages: 27
Date: 2024-12-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bostonfed.org/publications/research-de ... from-delayed-ui.aspx Summary (text/html)
https://www.bostonfed.org/-/media/Documents/Workingpapers/PDF/2024/wp2416.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedbwp:99291

Ordering information: This working paper can be ordered from

DOI: 10.29412/res.wp.2024.16

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Boston Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Spozio ().