Spend as you were told: Evidence from labeled COVID-19 stimulus payments in South Korea
Publication Type
Journal Article
Publication Date
5-2023
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.
Keywords
Income fungibility, COVID-19 stimulus payments, Spending, Card transaction data
Discipline
Asian Studies | Behavioral Economics | Public Health
Research Areas
Applied Microeconomics
Publication
Journal of Public Economics
Volume
221
First Page
1
Last Page
17
ISSN
0047-2727
Identifier
10.1016/j.jpubeco.2023.104867
Publisher
Elsevier
Citation
KIM; KOH, Kanghyock; and LYOU, Wonjun.
Spend as you were told: Evidence from labeled COVID-19 stimulus payments in South Korea. (2023). Journal of Public Economics. 221, 1-17.
Available at: https://ink.library.smu.edu.sg/soe_research/2728
Additional URL
https://doi.org/10.1016/j.jpubeco.2023.104867