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SSRN
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Disentangling Financial Constraints, Precautionary Savings, and Myopia: Household Behavior Surrounding Federal Tax Returns

SSRN Electronic Journal
2020
  • 6
    Citations
  • 4,290
    Usage
  • 25
    Captures
  • 3
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    6
    • Citation Indexes
      4
    • Policy Citations
      2
      • Policy Citation
        2
  • Usage
    4,290
    • Abstract Views
      3,764
    • Downloads
      526
  • Captures
    25
  • Mentions
    3
    • News Mentions
      3
      • News
        3
  • Ratings
    • Download Rank
      107,708

Most Recent News

Owe the IRS? No problem, some Americans say

Newswise — COLUMBUS, Ohio – A new study shows the surprising way that many American taxpayers adjust their standard of living when they owe money

Article Description

Analyzing account-level data from an account aggregator, we find that households increase consumption when they receive (expected) tax refunds, as if they face liquidity constraints. However, these same households smooth consumption when making payments in other years, primarily by transferring funds among liquid accounts. Even households carrying credit card debt smooth consumption when making payments, and even highly-liquid households spend out of refunds. This behavior is inconsistent with pure liquidity constraints or hand-to-mouth behavior and most consistent with a mental accounting life-cycle model.

Bibliographic Details

Brian Baugh; Itzhak Ben-David; Hoonsuk Park; Jonathan A. Parker

Elsevier BV

Consumption; household finance; liquidity constraints; hand-to-mouth; mental accounting; tax refunds

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