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Can Stimulus Checks Boost an Economy under COVID-19? Evidence from South Korea

Author

Listed:
  • Kim, Moon Jung

    (Korea Institute of Public Finance (KIPF))

  • Lee, Soohyung

    (Seoul National University)

Abstract

Various countries have implemented transfer programs to individuals since the Covid-19 outbreaks. However, the extent to which such transfers alleviate economic recessions is unclear. This paper analyzes a South Korean program, which provided vouchers redeemable only at small local businesses. We find that, due to the program, over 30% of households across all income groups increased their food and overall household spending, but the usage restriction may have affected consumer choice, distorting business competition. While the employment and sales of small businesses improved, the program's fiscal sustainability is in question because of the large tax exemption.

Suggested Citation

  • Kim, Moon Jung & Lee, Soohyung, 2020. "Can Stimulus Checks Boost an Economy under COVID-19? Evidence from South Korea," IZA Discussion Papers 13567, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13567
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    References listed on IDEAS

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    1. Raj Chetty & John N. Friedman & Michael Stepner & The Opportunity Insights Team, 2020. "The Economic Impacts of COVID-19: Evidence from a New Public Database Built Using Private Sector Data," NBER Working Papers 27431, National Bureau of Economic Research, Inc.
    2. 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.
    3. Kamhon Kan & Shin-Kun Peng & Ping Wang, 2017. "Understanding Consumption Behavior: Evidence from Consumers' Reaction to Shopping Vouchers," American Economic Journal: Economic Policy, American Economic Association, vol. 9(1), pages 137-153, February.
    4. Hsieh, Chang-Tai & Shimizutani, Satoshi & Hori, Masahiro, 2010. "Did Japan's shopping coupon program increase spending?," Journal of Public Economics, Elsevier, vol. 94(7-8), pages 523-529, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Economic policy > Household support > Cash transfers

    Citations

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    Cited by:

    1. Seungjun Baek & Seongeun Kim & Tae-hwan Rhee & Wonmun Shin, 2023. "How effective are universal payments for raising consumption? Evidence from a natural experiment," Empirical Economics, Springer, vol. 65(5), pages 2181-2211, November.
    2. Satoshi Tanaka, 2022. "Economic Impacts of SARS/MERS/COVID‐19 in Asian Countries," Asian Economic Policy Review, Japan Center for Economic Research, vol. 17(1), pages 41-61, January.
    3. Masciandaro, Donato & Goodhart, Charles & Ugolini, Stefano, 2021. "Pandemic recession and helicopter money: Venice, 1629–1631," Financial History Review, Cambridge University Press, vol. 28(3), pages 300-318, December.
    4. Kubota, So & Onishi, Koichiro & Toyama, Yuta, 2021. "Consumption responses to COVID-19 payments: Evidence from a natural experiment and bank account data," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1-17.
    5. Woo, Seokjin & Aum, Sangmin & Kim, Dohyung & Moon, Heyjin & Lee, Soohyung, 2021. "Consumption Response to Seoul's COVID-19 Shopping Coupons: Evidence from Consumer Data," IZA Discussion Papers 14662, Institute of Labor Economics (IZA).
    6. Seokjin Woo & Sangmin Aum & Dohyung Kim & Heyjin Moon & Soohyung Lee, 2022. "Consumption Response to Seoul’s COVID-19 Shopping Coupons: Evidence from Consumer Data (Covid-19 Special Issue)," Korean Economic Review, Korean Economic Association, vol. 38, pages 231-250.

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    More about this item

    Keywords

    COVID-19; stimulus payment; universal transfers; consumption; distortion;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • D3 - Microeconomics - - Distribution
    • D6 - Microeconomics - - Welfare Economics
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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