In March 2021, the U.S. federal government passed the American Rescue Plan Act, which temporarily expanded the Child Tax Credit (CTC) into a large, unconditional child allowance providing monthly payments to families with children. This study investigates consumption responses to the CTC expansion using anonymized mobile-location data and debit/credit card data that track visits and spending at 1.3 million establishments across US counties. For identification, we exploit variation in the size of households’ income gains due to the CTC across counties in a difference-in-differences framework spanning January 2021 to May 2022. Counties benefiting most from the CTC expansion experienced larger increases in visits to childcare centers and health- and personal-care establishments, and increased visits to and spending at grocery and general stores. We find no evidence of increased spending on alcohol or tobacco. These findings suggest that the CTC expansion increased household consumption and particularly spending on children.
Zachary Parolin is an Associate Professor of Social Policy at Bocconi University and a Senior Research Fellow at Columbia University's Center on Poverty and Social Policy. He has published more than 50 peer-reviewed articles and one book on the topics of child poverty, family well-being, and public policy.
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