@article{Zaki:232213,
      recid = {232213},
      author = {Zaki, Mary},
      title = {Access to Short-term Credit and Consumption Smoothing  within the Paycycle},
      address = {2016-03-01},
      number = {843-2016-55936},
      series = {ET},
      pages = {66},
      month = {Mar},
      year = {2016},
      abstract = {I study the effect of access to payday loans on the  timing, level and composition of consumption. Using a newly  obtained military administrative dataset of sales at  on-base grocery and department stores, I examine how  consumption behavior changes after the passage of a federal  law that effectively bans military personnel from accessing  payday loans in some states but not others. The military  setting is ideal for this analysis because military  personnel are assigned to locations across the United  States with varying degrees of access to payday loans.  Furthermore, since military personnel face varying known  wait times between paycheck receipts throughout the year, I  can examine daily consumption patterns in ways that were  infeasible with previous datasets and surveys. I first  present evidence that food expenditures spike on payday and  are significantly lower at the end of a pay period; the  fact that these patterns hold for perishable goods like  produce indicates that food consumption is also not smooth,  even over a two-week period. Then using a  difference-in-difference framework, I find that payday loan  access enables consumers to better smooth their consumption  between paychecks, with no detectable effect on the level  of food consumption. These patterns imply that payday loans  enable liquidity-constrained individuals to smooth their  consumption. However, I also find suggestive evidence that  they lead to temptation purchases. Military personnel  purchase more alcohol and electronics when given access to  payday loans. Further evidence suggests that there may be  significant heterogeneity in the population, with  indications of present-biased preferences among some  individuals and forward-looking, self controlled behavior  among others.},
      url = {http://ageconsearch.umn.edu/record/232213},
      doi = {https://doi.org/10.22004/ag.econ.232213},
}