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How Does Household Spending Respond to an Epidemic? Consumption During the 2020 COVID-19 Pandemic

Author

Listed:
  • Scott R. Baker

    (Northwestern University, Kellogg and NBER)

  • R.A. Farrokhnia

    (Columbia Business School, Columbia Engineering School)

  • Steffen Meyer

    (University of Southern Denmark and Danish Finance Institute)

  • Michaela Pagel

    (Columbia Business School, NBER, and CPER)

  • Constantine Yannelis

    (University of Chicago - Booth School of Business and NBER)

Abstract

We explore how household consumption responds to epidemics, utilizing transaction-level household financial data to investigate the impact of the COVID-19 virus. As the number of cases grew, households began to radically alter their typical spending across a number of major categories. Initially spending increased sharply, particularly in retail, credit card spending and food items. This was followed by a sharp decrease in overall spending. Households responded most strongly in states with shelter-in-place orders in place by March 29th. We explore heterogeneity across partisan affiliation, demographics and income. Greater levels of social distancing are associated with drops in spending, particularly in restaurants and retail.

Suggested Citation

  • Scott R. Baker & R.A. Farrokhnia & Steffen Meyer & Michaela Pagel & Constantine Yannelis, 2020. "How Does Household Spending Respond to an Epidemic? Consumption During the 2020 COVID-19 Pandemic," Working Papers 2020-30, Becker Friedman Institute for Research In Economics.
  • Handle: RePEc:bfi:wpaper:2020-30
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Consumption; Coronavirus; COVID-19; Household Finance; Transaction Data;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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