Saving by Buying Ahead : Stockpiling in Response to Income Tax

Income tax refunds are often significant lump-sum payments for households in the US. These payments allow households to increase their expenditures, including purchasing larger quantities of goods and stockpiling them for future consumption. Buying larger quantities allows households to reduce transaction costs and acquire goods at a lower cost per unit. This study exploits variation in state tax laws over time to estimate consumer stockpiling. Households purchase around 20% more of easily-stored toilet paper, but do not increase purchases of perishables like bread and eggs. The inter-purchase time also increases; households are not simply increasing consumption in response to more income. Consumers who receive larger tax refunds appear to stockpile and smooth their consumption of goods over time. Lump sum payments may benefit people by facilitating stockpiling