The Effects of the Earned Income Credit on the Seasonality of Household Expenditures
Posted: 7 Mar 2001
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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