Spending impact of COVID-19 stimulus payments: Evidence from card transaction data in South Korea

• Main Authors: KIM, KOH, Kanghyock, LYOU, Wonjun
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: COVID-19; stimulus payment; universal transfers; consumption; distortion; Asian Studies; Behavioral Economics; Public Health
• Online Access: https://ink.library.smu.edu.sg/soe_research/2441; https://ink.library.smu.edu.sg/context/soe_research/article/3440/viewcontent/dp13567.pdf
• Institution: Singapore Management University

Various countries have implemented transfer programs to individuals since the Covid-19 outbreaks. However, the extent to which such transfers alleviate economic recessions is unclear. This paper analyzes a South Korean program, which provided vouchers redeemable only at small local businesses. We find that, due to the program, over 30% of households across all income groups increased their food and overall household spending, but the usage restriction may have affected consumer choice, distorting business competition. While the employment and sales of small businesses improved, the program’s fiscal sustainability is in question because of the large tax exemption.