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AREUEA Virtual Seminar - Kwan Ok Lee (National University of Singapore), "Spatial Dynamics of Stimulus Payments: Consumption Patterns and Potential Spillovers on Virus Spreads"
Abstract: In the wake of the COVID-19 crisis, stimulus payments have been designed and implemented in a number of countries and economies to help people pay for basic necessities and boost consumer spending for businesses hit hard by the pandemic. While facilitating economic activities, policymakers wanted to avoid unnecessary travel, and in turn, virus spreads at the same time. To analyze how policies could have addressed such a dilemma, we take advantage of the unique features of South Korean stimulus payments that posed restrictions on geographic boundaries and business sectors for consumption. A series of Difference-in-Differences regressions using credit card transaction data show that consumers were more likely to spend stimulus payments in their own neighborhoods or adjacent areas and that there was no significant increase in the COVID-19 cases during the usage period of stimulus payments. On the other hand, our results suggest that benefits from stimulus payments were uneven across industries so that some sectors involving face-to-face interactions like cultural activities did not experience a substantial increase in consumption. These findings provide important implications beyond South Korea and stimulus payments: Policymakers should account for spatial dynamics and their consequences in designing and implementing public policies and programs.

Jan 19, 2022 10:30 AM in Eastern Time (US and Canada)

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