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Changes in the Distribution of Economic Well-Being during the COVID-19 Pandemic: Evidence from Nationally Representative Consumption Data

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  • Bruce D. Meyer
  • Connacher Murphy
  • James X. Sullivan

Abstract

We examine the distribution of household consumption, income and savings from 2019 through the end of 2020 using the Consumer Expenditure Survey (CE) and other data. This is the first work to study the impact of the COVID-19 pandemic on economic well-being using nationally representative consumption data. We find that low percentiles of the consumption distribution see pre-pandemic growth and little change with the onset of the pandemic. On the other hand, higher percentiles of the consumption distribution do not increase before the pandemic and fall in 2020. Leveraging the rich demographics of our microdata, we find the most pronounced decline for high-educated families near the top of the consumption distribution and seniors in the top half of the distribution. The decrease in the top half is less evident for non-Whites. These patterns for consumption are different than those for income, particularly in the upper part of the distribution. Liquid assets increase in the upper half of the distribution, consistent with the divergence between the upper half of the income and consumption distributions. Our results suggest that the policy response to the pandemic averted a decrease in consumption for the most materially disadvantaged families, while changes in aggregate consumption accord with the observed patterns in the top of the consumption distribution. The changes for various types of consumption, and the distribution of those changes across the material resource distribution, are consistent with reductions in travel to work—which were large for those with greater material advantage—and restrictions on outlets for consumption.

Suggested Citation

  • 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.
    • Handle: RePEc:nbr:nberwo:29878
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    References listed on IDEAS

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    1. Martin Browning & Thomas F. Crossley & Guglielmo Weber, 2003. "Asking consumption questions in general purpose surveys," Economic Journal, Royal Economic Society, vol. 113(491), pages 540-567, November.
    2. Meyer, Bruce D. & Sullivan, James X., 2004. "The effects of welfare and tax reform: the material well-being of single mothers in the 1980s and 1990s," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1387-1420, July.
    3. Bruce D. Meyer & James X. Sullivan, 2012. "Winning the War: Poverty from the Great Society to the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 133-200.
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    Cited by:

    1. 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.
    2. Giovanni Gallo & Alessia sconti, 2023. "Could financial education be a universal social policy? A simulation of potential influences on inequality levels," Center for the Analysis of Public Policies (CAPP) 0182, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    3. Larrimore, Jeff & Mortenson, Jacob & Splinter, David, 2023. "Earnings business cycles: The Covid recession, recovery, and policy response," Journal of Public Economics, Elsevier, vol. 225(C).
    4. Jeehoon Han & Bruce D. Meyer & James X. Sullivan, 2022. "Real-Time Poverty, Material Well-Being, and the Child Tax Credit," National Tax Journal, University of Chicago Press, vol. 75(4), pages 817-846.
    5. Daniel H. Cooper & Barry Z. Cynamon & Steven Fazzari, 2023. "Sustainable Consumption and the Comprehensive Economic Well-Being of American Households," Working Papers 23-5, Federal Reserve Bank of Boston.

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • 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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