Spend as you were told: Evidence from labeled COVID-19 stimulus payments in South Korea

Seonghoon Kim; Kanghyock Koh; Wonjun Lyou

doi:10.1016/j.jpubeco.2023.104867

Spend as you were told: Evidence from labeled COVID-19 stimulus payments in South Korea

Seonghoon Kim, Kanghyock Koh, Wonjun Lyou

Department of Economics

Research output: Contribution to journal › Article › peer-review

Abstract

We test the income fungibility assumption from standard economic theory by analyzing spending responses to South Korea's labeled COVID-19 stimulus payments. We exploit unique policy rules for identification: (1) recipients cannot use payments outside their province of residence, and (2) they can only use payments at establishments in pre-specified sectors. Using data on card transactions in Seoul, we find that households do not consider stimulus payments fungible. Compared to Seoul residents’ benchmark spending responses to cash income gains by sector, the stimulus payments disproportionately increased Seoul residents’ spending in the allowed sector compared to the non-allowed sector. The payments did not increase non-Seoul residents’ card spending. Our results imply that labeled stimulus payments with usage restrictions can boost household consumption spending in targeted sectors or locations during economic recessions.

Original language	English
Article number	104867
Journal	Journal of Public Economics
Volume	221
DOIs	https://doi.org/10.1016/j.jpubeco.2023.104867
Publication status	Published - 2023 May

Bibliographical note

Funding Information:
☆ We thank the co-editor, Damon Jones, and two anonymous referees for their valuable comments and suggestions. We also thank seminar participants at KAIST, Korea University, Seoul National University, Sogang University, Yonsei University, the Korean Economic Assocation annual meeting, and the Korea Labor Economics Association monthly meeting. We are grateful to the Seoul Metropolitan Government Big Data Campus for data access. Kim and Koh acknowledge financial support from the Ministry of Education of the Republic of Korea and the National of Korea (NRF-2021S1A5A2A03064205). Koh acknowledges financial support by Korea University grant (K2306231). The previous version of this paper was circulated as “Do COVID-19 Stimulus Payments Stimulate the Economy?” All errors are on our own.

Funding Information:
We thank the co-editor, Damon Jones, and two anonymous referees for their valuable comments and suggestions. We also thank seminar participants at KAIST, Korea University, Seoul National University, Sogang University, Yonsei University, the Korean Economic Assocation annual meeting, and the Korea Labor Economics Association monthly meeting. We are grateful to the Seoul Metropolitan Government Big Data Campus for data access. Kim and Koh acknowledge financial support from the Ministry of Education of the Republic of Korea and the National of Korea (NRF-2021S1A5A2A03064205). Koh acknowledges financial support by Korea University grant (K2306231). The previous version of this paper was circulated as “Do COVID-19 Stimulus Payments Stimulate the Economy?” All errors are on our own.

Publisher Copyright:
© 2023 Elsevier B.V.

Keywords

COVID-19 stimulus payments
Card transaction data
Income fungibility
Spending

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.jpubeco.2023.104867

Cite this

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title = "Spend as you were told: Evidence from labeled COVID-19 stimulus payments in South Korea",

abstract = "We test the income fungibility assumption from standard economic theory by analyzing spending responses to South Korea's labeled COVID-19 stimulus payments. We exploit unique policy rules for identification: (1) recipients cannot use payments outside their province of residence, and (2) they can only use payments at establishments in pre-specified sectors. Using data on card transactions in Seoul, we find that households do not consider stimulus payments fungible. Compared to Seoul residents{\textquoteright} benchmark spending responses to cash income gains by sector, the stimulus payments disproportionately increased Seoul residents{\textquoteright} spending in the allowed sector compared to the non-allowed sector. The payments did not increase non-Seoul residents{\textquoteright} card spending. Our results imply that labeled stimulus payments with usage restrictions can boost household consumption spending in targeted sectors or locations during economic recessions.",

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Spend as you were told: Evidence from labeled COVID-19 stimulus payments in South Korea

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

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