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

@inproceedings{Baugh2014DisentanglingFC,
  title={Disentangling Financial Constraints , Precautionary Savings , and Myopia : Household Behavior Surrounding Federal Tax Returns},
  author={Brian Baugh and Itzhak Ben-David},
  year={2014}
}
We explore household consumption surrounding federal tax returns filings and refunds receipt to test various theories of consumption. Because uncertainty regarding the refund is resolved at filing, precautionary savings theory predicts an increase in consumption at this date. Contrary to this prediction, we find that households generally do not increase consumption at filing. Following the receipt of the refunds, consumption of both durables and nondurables increases dramatically and then… CONTINUE READING
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