Working Paper: CEPR ID: DP17058
Authors: Olga Goldfayn-Frank; Vivien Lewis; Nils Wehrhöfer
Abstract: Are cash transfers to households an effective policy for stimulating demand in a pandemic? We analyze three payments that German parents received as part of the Covid-19 stimulus program. We exploit randomization in the payment dates and daily home scanner data to evaluate the spending response to the transfers. The first transfer had a significant effect on spending, but only in counties with low infection rates. The second and third transfers, which coincided with much higher infection rates, failed to increase spending. Moreover, the transfers increased the number of shop visits, possibly contributing to the spread of the virus.
Keywords: fiscal stimulus; household spending; marginal propensity to consume; pandemic; transfer
JEL Codes: D12; E21; E62; H24; H31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| child bonus payment (J13) | household spending (D10) |
| child bonus payment (J13) | number of shop visits (L81) |
| COVID-19 infection rates (Y10) | effectiveness of cash transfers (F35) |
| child bonus payment (J13) | household spending (nondurable goods) (D12) |
| child bonus payment (J13) | online shopping (limited shift) (L81) |