Abstract: We estimate how expenditures on durable goods respond to transitory income shocks using variation from the Economic Stimulus Act of 2008. The estimated responses are large: Households spend about 85 percent within three months of receiving the income transfer. Most of this spending was on motor vehicles, either used, financed, or both. Households also raised spending on semi-durables such as clothing and footwear as well as other small items. Our findings suggest that durable goods are key for understanding the link between current income and spending.

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