We leverage exogenous income changes from various state and federal transfer policies to demonstrate that U.S. consumers tend to increase spending in advance of income arrival. These anticipatory increases (pre-MPCs) are small compared to the substantial increases observed following income receipt (post-MPCs), but respond to the salience of the payment event. Individuals exhibit significant heterogeneity in anticipatory spending responses, and these responses are persistent within individuals over time, suggesting that much of the correlation between MPCs and financial characteristics like liquidity is driven by personality traits. Utilizing this additional dimension of consumption response across multiple policy-induced income changes per individual, we cluster individuals into distinct types.

This paper is joint work with Michael Gelman, Lorenz Kung, and Seung Lee.