Coming in at a Trickle: The Optimal Frequency of Public Benefit Payments

Abstract

The question of how governments should choose the frequency of payments has received little attention in the literature on the optimal design of public benefits programs. We propose a simple model in which the government chooses the length of the interval between payments, subject to a tradeoff between the administrative cost of providing more frequent benefits and the welfare gain from reducing deviations from full consumption smoothing. In our empirical application, we examine consumer and retailer responses to bimonthly payments from the Japanese National Pension System. We exploit variation in the duration of payment cycles using a unique retail dataset that links consumers to their purchase history. Our difference-indifferences style approach shows a clear spike in spending on payment dates for customers who are of retirement age relative to those who are not. While within-store average prices increase by 1.6% on payday, this effect is almost entirely due to consumers substituting towards higher quality goods rather than a retailer response. We use these reduced form estimates to parameterize the model and conclude that the optimal frequency of Japanese public pension payments is less than one month, implying the government could improve welfare by increasing payment frequency.

How are SNAP Benefits Spent? Evidence from a Retail Panel

“…least one SNAP month, and 21.6 percent experience at least two consecutive SNAP months. 24 SNAP penetration is lower in the retail panel than in the United States as a whole. Calculations in the online Appendix show that an average of 14.5 percent of US households were on SNAP during the months of the retail sample period.…”

“…The coefficients in columns 2 through 4 are statistically significant. (24,456) Notes: Specification 1 corresponds to baseline results presented in the body of the paper. The first and second columns of numbers report coefficients and standard errors from the third column of Table 1.…”

How Are SNAP Benefits Spent? Evidence from a Retail Panel

“…We calculate each household's total monthly SNAP benefits as the household's total spending across all SNAP purchase occasions within the month. 29 The online Appendix compares the distribution of SNAP benefits between the retail panel and the administrative data for the Rhode Island Retailer.…”

“…These calculations are performed at the level of the store division, product category and week, weighting by total expenditures, and excluding the top and bottom 0.1 percent of observations for each respective calculation 29. Our concept of total SNAP benefits has a correlation of 0.99 with the exact amount of SNAP spending calculated using detailed payment information in SNAP months March 2009 and later.…”