Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus Payments

By Scott R. Baker, R. Farrokhnia, Steffen Meyer, Michaela Pagel, Constantine Yannelis, Suwen Ge, Spyros Kypraios, R. Liu. Social Science Research Network, 2020

243 citations recorded by the source corpus.

The 2020 CARES Act directed large cash payments to households. We analyze households’ spending responses using data from a Fintech non-profit, exploring heterogeneity by income, recent income declines, and liquidity as well as linked survey responses about economic expectations. Households respond rapidly to payments, with spending increasing by about $0.14 per dollar during the first week and plateauing around $0.25-$0.30 over 3 months. In contrast to previous stimulus programs, we see little response of durables spending. Households with lower incomes, greater income declines, and less liquidity display stronger responses whereas households that expect employment losses and benefit cuts display weaker responses.

View Paper: https://www.semanticscholar.org/paper/49ac640a56ad304a0b946550786a8a06f8f04953

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Citations in the corpus

• Consumer responses to the Covid‐19 crisis: evidence from bank account transaction data (2020, unknown): “Further, we create measures of spending in specific categories, such as groceries, travel and restaurants, based on a standardized coding of the type of goods and services each shop provides.(4) Finally, we create three composite spending categories that aggregate individual spending categories base”
• THE ECONOMIC IMPACTS OF COVID-19: EVIDENCE FROM A NEW PUBLIC DATABASE BUILT USING PRIVATE SECTOR DATA (2023, background): “Spending and employment also fell well before state-level shutdowns were implemented, consistent with other recent work examining data on hours of work and movement patterns (Bartik et al. 2020, Villas-Boas et al. 2020). Hence, differences in shutdown orders explain very little of the cross-state va”
• Consumer Spending Responses to the COVID-19 Pandemic: An Assessment of Great Britain (2020, methodology): “Baker et al (2020c) note that news coverage of 12 Similarly, for the US, Alon et al (2020) suggest that employment losses arising from social distancing interventions has a larger impact on sectors with higher female employment shares.”
• Heterogeneous Labor Market Impacts of the COVID-19 Pandemic (2020, methodology): “(2020), and Béland et al. (2020) build upon, showing better labor market outcomes for workers in occupations that were more likely to be able to work from home or were less likely to have to work in close proximity to others.”