Articlegreen2000

The Effects of the Earned Income Credit on the Seasonality of Household Expenditures

114 citations0/0 files storedNational Tax Journal

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Gender, Labor, and Family Dynamics Economic and Fiscal Studies Financial Literacy, Pension, Retirement Analysis

Abstract

Using data from the Consumer Expenditure Survey, we investigate whether the Earned Income Credit (EIC) leads to changes in seasonal expenditure patterns of low-income workers. We find that EIC eligible households spend approximately 3 percent more total during February, the modal month of EIC refunds, and 9 percent more on durable goods than non-eligible households. The increased spending on durable goods indicates that the EIC facilitates the purchasing of big-ticket items by low-income families. These estimates, when converted to dollars, also suggest that EIC recipients smooth expenditure somewhat since the average increase in expenditure is less than the average EIC refund.

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Cited by

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