TY - JOUR
T1 - Spend as you were told
T2 - Evidence from labeled COVID-19 stimulus payments in South Korea
AU - Kim, Seonghoon
AU - Koh, Kanghyock
AU - Lyou, Wonjun
N1 - 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.
PY - 2023/5
Y1 - 2023/5
N2 - 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.
AB - 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.
KW - COVID-19 stimulus payments
KW - Card transaction data
KW - Income fungibility
KW - Spending
UR - http://www.scopus.com/inward/record.url?scp=85151869339&partnerID=8YFLogxK
U2 - 10.1016/j.jpubeco.2023.104867
DO - 10.1016/j.jpubeco.2023.104867
M3 - Article
AN - SCOPUS:85151869339
SN - 0047-2727
VL - 221
JO - Journal of Public Economics
JF - Journal of Public Economics
M1 - 104867
ER -