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The Impact of COVID-19 Regional Cash Subsidies on the Sales of Local Businesses in South Korea

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  • Kim, Meeroo
  • Oh, Yoon Hae

Abstract

This paper examines the impact of the regional cash subsidies which were granted in some districts in addition to the national universal stimulus payment in South Korea related to the COVID-19 pandemic. We evaluate the effects of the cash distribution per resident on aggregate credit and debit card sales and sales by industry using the difference-in-difference method. The increment in card spending due to the cash subsidy is about 1.58%p in total, and this effect is concentrated within a single month. The consumption stimulating effect is prominent among (semi)-durable goods that do not require close interactions between customers and sellers. In contrast, the effect is relatively small in the high-contact face-to-face service sectors and restaurants, areas the COVID-19 pandemic hit directly. On the other hand, some service sectors where customers could wear face masks, such as education and fitness, experienced a substantial sales boost due to the cash subsidy.

Suggested Citation

  • Kim, Meeroo & Oh, Yoon Hae, 2021. "The Impact of COVID-19 Regional Cash Subsidies on the Sales of Local Businesses in South Korea," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 43(2), pages 103-123.
    • Handle: RePEc:zbw:kdijep:235948
    DOI: 10.23895/kdijep.2021.43.2.103
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    Cited by:

    1. Hoyong Jung, 2023. "Can Universal Cash Transfer Save Newborns’ Birth Weight During the Pandemic?," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 42(1), pages 1-22, February.

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    More about this item

    Keywords

    COVID-19; Stimulus Payment; Cash;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

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