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Impacts of COVID-19 lockdowns and stimulus payments on low-income population’s spending in the United States

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  • Kangli Li
  • Natasha Zhang Foutz
  • Yuxin Cai
  • Yunlei Liang
  • Song Gao

Abstract

The COVID-19 pandemic has profoundly impacted the economy and human lives worldwide, particularly the vulnerable low-income population. We employ a large panel data of 5.6 million daily transactions from 2.6 million debit cards owned by the low-income population in the U.S. to quantify the joint impacts of the state lockdowns and stimulus payments on this population’s spending along the inter-temporal, geo-spatial, and cross-categorical dimensions. Leveraging the difference-in-differences analyses at the per card and zip code levels, we uncover three key findings. (1) Inter-temporally, the state lockdowns diminished the daily average spending relative to the same period in 2019 by $3.9 per card and $2,214 per zip code, whereas the stimulus payments elevated the daily average spending by $15.7 per card and $3,307 per zip code. (2) Spatial heterogeneity prevailed: Democratic zip codes displayed much more volatile dynamics, with an initial decline three times that of Republican zip codes, followed by a higher rebound and a net gain after the stimulus payments; also, Southwest exhibited the highest initial decline whereas Southeast had the largest net gain after the stimulus payments. (3) Across 26 categories, the stimulus payments promoted spending in those categories that enhanced public health and charitable donations, reduced food insecurity and digital divide, while having also stimulated non-essential and even undesirable categories, such as liquor and cigar. In addition, spatial association analysis was employed to identify spatial dependency and local hot spots of spending changes at the county level. Overall, these analyses reveal the imperative need for more geo- and category-targeted stimulus programs, as well as more effective and strategic policy communications, to protect and promote the well-being of the low-income population during public health and economic crises.

Suggested Citation

  • Kangli Li & Natasha Zhang Foutz & Yuxin Cai & Yunlei Liang & Song Gao, 2021. "Impacts of COVID-19 lockdowns and stimulus payments on low-income population’s spending in the United States," PLOS ONE, Public Library of Science, vol. 16(9), pages 1-24, September.
  • Handle: RePEc:plo:pone00:0256407
    DOI: 10.1371/journal.pone.0256407
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    References listed on IDEAS

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    1. Guojun He & Yuhang Pan & Takanao Tanaka, 2020. "The short-term impacts of COVID-19 lockdown on urban air pollution in China," Nature Sustainability, Nature, vol. 3(12), pages 1005-1011, December.
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    Cited by:

    1. Vincent Fusaro & H. Luke Shaefer & Pinghui Wu, 2022. "Government Transfers and Consumer Spending among Households with Children during COVID-19," Working Papers 22-17, Federal Reserve Bank of Boston.
    2. Batara Surya & Hernita Hernita & Agus Salim & Seri Suriani & Iwan Perwira & Yulia Yulia & Muhlis Ruslan & Kafrawi Yunus, 2022. "Travel-Business Stagnation and SME Business Turbulence in the Tourism Sector in the Era of the COVID-19 Pandemic," Sustainability, MDPI, vol. 14(4), pages 1-37, February.

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