Riches to Rags Every Month? The Fall in Consumption Expenditures between Paydays

Transitory income changes and consumption smoothing: Evidence from Mexico

“…For these recipients, distance from the bank may act as a commitment device and help to prevent this behavior. These findings are conceptually consistent with Huffman and Barenstein (2004); Mastrobuoni and Weinberg (2009); Shapiro (2005). However, junk food represents only 8% of total food consumption and distance from a bank branch does not significantly affect overall food consumption smoothing.…”

“…The literature suggests that more frequent transfers (Shapiro 2005;Mastrobuoni and Weinberg 2009) or in-kind transfers (Huffman and Barenstein 2004) may help recipients smooth consumption in the presence of time-inconsistent preferences. Our results suggest that reducing the transfer liquidity may also improve consumption smoothing for some households.…”

“…This occurs to time inconsistent and relatively new recipients. This finding suggests that the relative illiquidity of the transfer may help some time-inconsistent transfer recipients to smooth consumption, as in Huffman and Barenstein (2004), Shapiro (2005), and Mastrobuoni and Weinberg (2009).…”

Fully Closed: Individual Responses to Realized Gains and Losses

“…Thus, the transfer between accounts matters, even though the money is theoretically fungible (abstracting from transaction costs). Thaler (1985) and Shefrin and Thaler (1988) pioneered the mental accounting literature, and several studies provide additional empirical evidence (Huffman and Barenstein, 2005; Abeler and Marklein, 2008; Choi, Laibson, and Madrian, 2009; Milkman and Beshears, 2009; Feldman, 2010; Karle, Kirchsteiger, and Peitz, 2015). In the domain of stock market investments, mental accounts are a necessary ingredient to explain the disposition effect (Odean, 1998), that is, the empirical phenomenon whereby investors hold on to unrealized capital losses.…”

Temporal Instability of Risk Preference among the Poor: Evidence from Payday Cycles

“…We run balanced tests to ensure the random assignment of interview dates to respondents over the month. This approach allows us to obtain the causal estimate of the effect of income fluctuation around payday on the risk 1 See, for example, studies in the US (Wilde and Ranney 2000;Stephens 2003;Shapiro 2005;Mastrobuoni and Weinberg 2009;Hastings and Washington 2010) and the UK (Huffman and Barenstein 2005;Stephens 2006). 2 E.g., Supplemental Nutrition Assistance Program (SNAP) and Supplemental Security Income (SSI) in the US.…”