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Government Transfers and Consumer Spending among Households with Children during COVID-19

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Abstract

Leveraging novel data on consumer credit and debit card spending by Zip code, this study examines how the impact of government transfers on economic well-being varied by household type during the COVID-19 pandemic. Our findings indicate that pandemic transfers disproportionately benefited households with children, buffering them from earnings losses at the pandemic’s start and sustaining spending growth over time. Household essential spending increased proportionally with the delivery of cash transfers, while discretionary spending was influenced more by pandemic-specific factors beyond household income. Our results also offer preliminary evidence that households with children had a higher marginal propensity to consume during the early stages of the pandemic. These findings highlight the efficacy of government transfers in safeguarding household consumption during a period of large-scale job loss.

Suggested Citation

  • Vincent Fusaro & H. Luke Shaefer & Pinghui Wu, 2022. "Government Transfers and Consumer Spending among Households with Children during COVID-19," Working Papers 22-17, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbwp:95263
    DOI: 10.29412/res.wp.2022.17
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    1. Jonathan A. Parker & Jake Schild & Laura Erhard & David S. Johnson, 2021. "Household Spending Responses to the Economic Impact Payments of 2020: Evidence from the Consumer Expenditure Survey," Economic Working Papers 544, Bureau of Labor Statistics.
    2. Kangli Li & Natasha Zhang Foutz & Yuxin Cai & Yunlei Liang & Song Gao, 2021. "Impacts of COVID-19 lockdowns and stimulus payments on low-income population’s spending in the United States," PLOS ONE, Public Library of Science, vol. 16(9), pages 1-24, September.
    3. Scott R. Baker & Robert A Farrokhnia & Steffen Meyer & Michaela Pagel & Constantine Yannelis, 2023. "Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus Payments," Review of Finance, European Finance Association, vol. 27(6), pages 2271-2304.
    4. Bruce D. Meyer & Connacher Murphy & James X. Sullivan, 2022. "Changes in the Distribution of Economic Well-Being during the COVID-19 Pandemic: Evidence from Nationally Representative Consumption Data," NBER Working Papers 29878, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    consumer spending; children; government transfers; COVID-19;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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