A Study on the Reaction of Households' Entertainment Consumption Due to the Path Act

Contrary to traditional economic theory, studies have demonstrated how temporary increases in discretionary income can alter consumption habits of individuals. Furthermore, research has shown that spending on non-necessities, such as entertainment, can be influenced by increases in discretionary income as well as several other factors. This study attempts to analyze this relationship and whether a shift in the timing of tax refunds due to the PATH Act has changed entertainment spending in households. Using Consumer Expenditures Survey interview data, this paper will attempt to answer this question by focusing on households who obtained the EITC and ACTC. Although no statistically significant results were found in the main analysis, recurring patterns in the data challenged assumptions and expectations. Drops in entertainment spending across March 2015 and March 2016 despite an overall growth in entertainment expenditures, for example, demonstrates the need for further analysis.