Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70585
Authors: 
Agarwal, Sumit
McGranahan, Leslie
Year of Publication: 
2012
Series/Report no.: 
Working Paper, Federal Reserve Bank of Chicago 2012-10
Abstract: 
Every year over 20 states offer sales tax holidays (STHs) on specific items like clothes, shoes and other items to encourage consumption, effecting over 100 million consumers. We use a unique dataset of credit cards transaction to study the spending response to these holidays. Using a diff-in-diff methodology, we find that STHs increase overall daily spending by 8%, with large percentage increases in spending on children's clothes and shoes of 193% and 98% respectively. Consumers with children increase spending more during STHs. Our estimates of price elasticities range from 6 for big box merchants to 30 for kids clothing merchants (in absolute terms). There is no evidence of inter-temporal substitution either before or after the STH or cross-product substitution away from non-treated goods. Finally, we show that consumers from across state borders also take advantage of these tax holidays and shop in states offering holidays. Our falsification tests rule out concerns that our results are driven by spurious correlations.
Subjects: 
Consumption
State Sales Tax Holidays
Back to School
Credit Cards
Household Finance
Banks
Loans
Shopping
Spending
JEL: 
D12
G21
H20
H71
L81
Document Type: 
Working Paper

Files in This Item:
File
Size
476.55 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.