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The impact of unexpected delays in periodic payments on consumption

Author

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  • Gelman, Michael
  • Orlando, Zachary
  • Patki, Dhiren

Abstract

We study how unexpected delays in periodic payments affect spending behavior. Our empirical approach uses transaction-level data on income and spending and exploits quasi-random delays in the receipt of unemployment insurance (UI) benefits. Spending drops by about half of the loss in income that occurs while individuals wait for UI benefits, revealing the value of periodic payments for liquidity-constrained individuals. Once delayed payments are received as lump sums, individuals reallocate spending toward less commonly purchased big-ticket categories that are dominated by durables.

Suggested Citation

  • Gelman, Michael & Orlando, Zachary & Patki, Dhiren, 2025. "The impact of unexpected delays in periodic payments on consumption," Journal of Public Economics, Elsevier, vol. 252(C).
    • Handle: RePEc:eee:pubeco:v:252:y:2025:i:c:s0047272725002221
    DOI: 10.1016/j.jpubeco.2025.105523
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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