Working Paper: NBER ID: w27617
Authors: natalie bachas; peter ganong; pascal j noel; joseph s vavra; arlene wong; diana farrell; fiona e greig
Abstract: We use U.S. household-level bank account data to investigate the heterogeneous effects of the pandemic on spending and savings. Households across the income distribution all cut spending from March to early April. Since mid April, spending has rebounded most rapidly for low-income households. We find large increases in liquid asset balances for households throughout the income distribution. However, lower-income households contribute disproportionately to the aggregate increase in balances, relative to their pre-pandemic shares. Taken together, our results suggest that spending declines in the initial months of the recession were primarily caused by direct effects of the pandemic, rather than resulting from labor market disruptions. The sizable growth in liquid assets we observe for low-income households suggests that stimulus and insurance programs during this period likely played an important role in limiting the effects of labor market disruptions on spending.
Keywords: COVID-19; consumer behavior; spending; savings; income distribution
JEL Codes: E21; E62; H31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| pandemic direct effects (F69) | spending declines (E20) |
| government stimulus programs (H81) | spending stabilization (E63) |
| income (E25) | spending (H72) |
| stimulus payments timing (H20) | low-income households spending recovery (D19) |
| liquid assets increase (E41) | spending stabilization for low-income households (H53) |
| income loss (J17) | spending declines (E20) |
| shutdowns (J65) | high-income households spending on nonessential goods (D12) |
| spending recovery (E65) | ongoing fiscal support necessity (E62) |