Working Paper: NBER ID: w27596
Authors: Jianwei Xing; Eric Zou; Zhentao Yin; Yong Wang; Zhenhua Li
Abstract: We study a new consumption stimulus model that leverages mobile payment platforms to dispense massive amounts of small-value, use-it-this-week-or-lose-it digital coupons. We evaluate the effects of one such program in a large Chinese city using novel data of mobile platform transactions of 1 million program participants. Exploiting participants’ rush to the first-come, first-served digital portal, we compare spending among those who won coupons to those who lost because of minor differences in the timing of their arrival at the portal. We find that coupons generate an immediate increase in weekly consumption among winners by $3 additional out-of-pocket spending for every $1 in government subsidy. Coupon-winning consumers practice intertemporal substitution by moving up purchases that would have been made months in the future. Analysis of business customer flows suggests that coupons distort consumption toward more expensive options, leading the program to disproportionately favor big firms that sell pricier goods and services. Relaxing coupons’ minimum spending requirements would alleviate such distributional concern without sacrificing consumer welfare. We conclude that the coupon model can be a useful addition to policy makers’ stimulus toolbox.
Keywords: digital coupons; consumer spending; economic stimulus; COVID-19 recovery
JEL Codes: D12; E42; H30; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Winning a coupon (Y60) | Immediate increase in weekly out-of-pocket spending (H51) |
| Winning a coupon (Y60) | Increase in unsubsidized spending (H59) |
| Winning a coupon (Y60) | Stimulates intertemporal substitution (D15) |
| Coupon program (C88) | Net increases in overall spending (H59) |