Economic Quarterly

We bring new evidence to bear on the contributions of changing transaction sizes and changing demographics to the decline in cash payments at a national retail chain. On average, across the thousands of store locations in our study, the share of cash transactions fell by 8.6 percentage points from February 2011 to February 2015. Our statistical model attributes approximately 1.3 percentage points of that decline to increasing transaction sizes. Changes in demographic and other location-specific variables contribute between 0.5 and 1.3 percentage points, so our analysis attributes approximately three-quarters of the decline in cash use to a pure time effect. The time effect stands in for reductions in the cost and increases in the availability and security of debit and credit cards, improvements in consumers' perceptions of cards, and any other factors omitted from our analysis.