A Penny Saved: Prices and the Timing of Paycheck Receipt
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This paper explores a puzzling empirical regularity: households pay less for foods
as the time since receipt of their last paycheck increases. I leverage randomization with
regard to paycheck timing to causally identify the effect of time since paycheck receipt
on prices. Estimates of the decline in prices range between 5% and 6% percent, over
the course of a month. I investigate several potential explanations for this behavior,
including credit constraints and stockpiling. I find evidence that the effect is driven by
low-income households and exacerbated by stockpiling behavior.