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Tax Rebates and the Cycle of Payday Borrowing

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  • Paige Marta Skiba

Abstract

I examine whether receipt of a $300 tax rebate by payday borrowers affects their likelihood of borrowing, loan size, or default behavior. Results from fixed-effects models show that the rebate decreases the probability of taking out a payday loan in the short run. These impacts are most apparent among credit-constrained, infrequent borrowers. Those who take out loans around the time of the rebate borrow amounts typical of their normal borrowing behavior but are more likely to default. Overall, however, the rebate's effects are small and short-lived, suggesting a muted response to this cash windfall in payday borrowing and repayment.

Suggested Citation

  • Paige Marta Skiba, 2014. "Tax Rebates and the Cycle of Payday Borrowing," American Law and Economics Review, American Law and Economics Association, vol. 16(2), pages 550-576.
    • Handle: RePEc:oup:amlawe:v:16:y:2014:i:2:p:550-576.
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    File URL: http://hdl.handle.net/10.1093/aler/aht022
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    Cited by:

    1. Marta Lachowska, 2017. "The Effect of Income on Subjective Well-Being: Evidence from the 2008 Economic Stimulus Tax Rebates," Journal of Human Resources, University of Wisconsin Press, vol. 52(2), pages 374-417.
    2. Can Cui, 2017. "Cash-on-hand and demand for credit," Empirical Economics, Springer, vol. 52(3), pages 1007-1039, May.

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