Consumption, Savings, and Earnings Responses to Financial Windfalls

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Staff Reports

Consumption, Savings, and Earnings Responses to Financial Windfalls

Number 1208
October 2026

JEL classification: D12, D15, E21, E62, H2, J22

Authors: Rajashri Chakrabarti, Philippe d’Astous, Kory Kroft, Sheisha Kulkarni, Vyacheslav Mikhed, Matthew J. Notowidigdo, Sahil Raina, and Barry Scholnick

We estimate the causal effects of a financial windfall on consumption, savings, and wage earnings using linked administrative data on a large sample of Canadian lottery winners. Using separate linkages of lottery winners to income tax records and credit bureau data, we estimate how lottery winnings affect consumption measured through credit card spending, savings through financial asset accumulation and debt repayment, and wage earnings from tax records. We then examine how these responses vary across the income distribution. We find that high-income individuals allocated a larger share of lottery winnings to savings and leisure, while low-income individuals spent a larger share on consumption. We illustrate the policy relevance of these heterogeneous responses through three applications: designing fiscal stimulus programs, evaluating a Universal Basic Income (UBI), and determining optimal top tax rates on wage earnings and savings.

Full Article

Author Disclosure Statement(s)

Rajashri Chakrabarti
The author declares that she has no relevant or material financial interests that relate to the research described in this paper.

Philippe d’Astous
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.

Kory Kroft
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.

Sheisha Kulkarni
The author declares that she has no relevant or material financial interests that relate to the research described in this paper.

Vyacheslav Mikhed
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.

Matthew J. Notowidigdo
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.

Sahil Raina
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.

Barry Scholnick
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.

Suggested Citation:
Chakrabarti, Rajashri, Philippe d’Astous, Kory Kroft, Sheisha Kulkarni, Vyacheslav Mikhed, Matthew J. Notowidigdo, Sahil Raina, and Barry Scholnick. 2026. “Consumption, Savings, and Earnings Responses to Financial Windfalls.” Federal Reserve Bank of New York Staff Reports, no. 1208, October. https://doi.org/10.59576/sr.1208

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