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Impact of Cash Transfers on Consumption during the COVID-19 Pandemic: Evidence from Japanese Special Cash Payments

Author

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  • HATTORI Takahiro
  • KOMURA Norihiro
  • UNAYAMA Takashi

Abstract

We estimate the marginal propensity to consume (MPC) out of the Special Cash Payment conducted in Japan during the COVID-19 pandemic. The MPC is identified by exploiting differences in the timing of the payment among cities using publicly available data from the Family Income and Expenditure Survey. The estimated MPC is approximately 10 percent, which does not differ from those estimated in previous studies conducted during the non-pandemic period. We also estimate the different MPCs by consumption subcategories defined based on the infection risk, finding that households did not increase spending on "face-to-face services" while "goods/services purchased at home" and "goods/services purchased at stores" increased.

Suggested Citation

  • HATTORI Takahiro & KOMURA Norihiro & UNAYAMA Takashi, 2021. "Impact of Cash Transfers on Consumption during the COVID-19 Pandemic: Evidence from Japanese Special Cash Payments," Discussion papers 21043, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:21043
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    References listed on IDEAS

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    1. Melvin Stephens & Takashi Unayama, 2019. "Estimating the Impacts of Program Benefits: Using Instrumental Variables with Underreported and Imputed Data," The Review of Economics and Statistics, MIT Press, vol. 101(3), pages 468-475, July.
    2. Michiru Kaneda & So Kubota & Satoshi Tanaka, 2021. "Who spent their COVID-19 stimulus payment? Evidence from personal finance software in Japan," The Japanese Economic Review, Springer, vol. 72(3), pages 409-437, July.
    3. Melvin Stephens & Takashi Unayama, 2011. "The Consumption Response to Seasonal Income: Evidence from Japanese Public Pension Benefits," American Economic Journal: Applied Economics, American Economic Association, vol. 3(4), pages 86-118, October.
    4. Stephens, Melvin & Unayama, Takashi, 2012. "The impact of retirement on household consumption in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 62-83.
    5. Hara, Ryota & Unayama, Takashi & Weidner, Justin, 2016. "The wealthy hand to mouth in Japan," Economics Letters, Elsevier, vol. 141(C), pages 52-54.
    6. Hori, Masahiro & Shimizutani, Satoshi, 2012. "Do households smooth expenditure over anticipated income changes? Evidence from bonus payments to public employees in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(3), pages 405-433.
    7. David Cashin & Takashi Unayama, 2016. "Measuring Intertemporal Substitution in Consumption: Evidence from a VAT Increase in Japan," The Review of Economics and Statistics, MIT Press, vol. 98(2), pages 285-297, May.
    8. Hsieh, Chang-Tai & Shimizutani, Satoshi & Hori, Masahiro, 2010. "Did Japan's shopping coupon program increase spending?," Journal of Public Economics, Elsevier, vol. 94(7-8), pages 523-529, August.
    9. Kubota, So & Onishi, Koichiro & Toyama, Yuta, 2021. "Consumption responses to COVID-19 payments: Evidence from a natural experiment and bank account data," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1-17.
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    Cited by:

    1. Bessho, S., 2023. "Elections and COVID-19 benefit payments," Journal of Asian Economics, Elsevier, vol. 87(C).
    2. MORIKAWA Masayuki, 2021. "COVID-19, Vaccination, and Consumer Behavior," Discussion papers 21079, Research Institute of Economy, Trade and Industry (RIETI).

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