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frojack writes:

Those government tax refunds, and other stimulus programs don't seem to provide the boost to the economy that government had hoped for. Nor, it turns out, are most Americans spending their paycheck as fast as they arrive. These results were discovered in new research by the University of Michigan and are based on users of a smartphone app that tracks user's spending. For 300 days, the researchers tracked a random sample of about 23,000 anonymous U.S.-based users who received regular payroll or Social Security payments.

They found that individuals shelled out about 70% more than average on the days after a payment arrived. But the bulk of this tended to be monthly bills that were scheduled to occur soon after funds arrived.

So the researchers picked out a single type of spending that's easily influenced by the perception of disposable income: cash shelled out for fast food and coffee. Here, most people's spending barely increased after a paycheck, the team reports online today in Science (paywalled). Obviously, those with lower income tended to spend more of their paycheck than others, and some do in fact spend whatever is available. But by and large, the average user did not increase discretionary spending in response to a bump in income.

The finding suggests that tax rebates and other cash infusions may not boost the economy as some have suggested, as most people would probably save the windfall for a rainy day, and money doesn't necessarily burn a hole in our pockets. The finding could help governments better stimulate the economy. If they could find ways to target tax rebates to people who have little cash in reserve (not to mention pent up demand), the payments might stimulate spending more effectively because these people are more likely to spend it. Harnessing the power of the spendthrift, as it were.