'3rd of Tha Month': Do Social Security Recipients Smooth Consumption between Checks?

41 Pages Posted: 30 Aug 2002 Last revised: 6 Aug 2014

See all articles by Melvin Stephens

Melvin Stephens

University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: August 2002

Abstract

This paper examines the response of consumption expenditures to the monthly receipt of Social Security checks. Since the amount and arrival date of these checks are known to the recipients, the basic Life-Cycle/Permanent Income Hypothesis (LCPIH) predicts that consumption should not respond to the receipt of these checks. Using daily diary data from the Consumer Expenditure Survey, this paper finds evidence that both the dollar amount and probability of expenditures increase immediately following the receipt of this check. Most relevant to testing the LCPIH, categories of instantaneous consumption expenditure such as food away from home increase on the check arrival date. The response is found primarily amongst households for whom Social Security is the primary source of income. However, the magnitude of the estimated responses are relatively small and do not suggest that the utility losses are large from this non-smoothing behavior.

Suggested Citation

Stephens, Melvin, '3rd of Tha Month': Do Social Security Recipients Smooth Consumption between Checks? (August 2002). NBER Working Paper No. w9135. Available at SSRN: https://ssrn.com/abstract=327161

Melvin Stephens (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

Ann Arbor, MI
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
33
Abstract Views
1,150
PlumX Metrics