Working Paper: CEPR ID: DP15101
Authors: Sinem Hacioglu; Diego Knzig; Paolo Surico
Abstract: The top quartile of the income distribution accounts for almost half of the pandemic-related decline in aggregate consumption, with expenditure for this group falling much more than income. In contrast, the bottom quartile of the income distribution has seen the smallest spending cuts and the largest earnings drop but their total incomes have fallen by much less because of the increase in government benefits. The decline in consumers' spending preceded the introduction of the lockdown, whose partial lifting has triggered a stronger recovery in sectors with a lower contract rate. The largest spending contractions are concentrated in the most affluent regions. These conclusions are based on detailed high-frequency transaction data on spending, earnings and income from a large Fintech company in the United Kingdom.
Keywords: spending; earnings; income; benefits; heterogeneity; pandemic
JEL Codes: D12; E21; G51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher-income individuals (D31) | reduced spending (H56) |
| increased government benefits (H53) | smallest cuts in spending for bottom quartile (H53) |
| decline in consumer spending (D12) | decreased consumption (E21) |
| largest spending contractions in affluent regions (E62) | spending patterns (D12) |
| government benefits (H55) | household income and spending behavior (D12) |
| top quartile of the income distribution accounts for almost half of the pandemic-related decline (E25) | decline in aggregate consumption (E21) |
| significant positive gap between the decline in income and spending for higher-income users (F61) | heterogeneity of the pandemic's impact across income groups (F61) |