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Economic Impact Payments and Household Spending During the Pandemic

Author

Listed:
  • Jonathan A. Parker
  • Jake Schild
  • Laura Erhard
  • David Johnson
Abstract
Households spent only a small fraction of their 2020 Economic Impact Payment (EIPs) within a couple of months of arrival, consistent with i) pandemic constraints on spending, ii) other pandemic programs and social insurance, and iii) the broader disbursement of the EIPs compared to the economic losses during the early stages of the pandemic. While these EIPs did not fill an urgent economic need for most households, the first round of EIPs did provide timely pandemic insurance to some households who were more exposed to the economic losses from the pandemic. Households with lower liquid wealth entering the pandemic and those less able to earn while working from home each raised consumption more following receipt of their EIP. While our measurement for later EIPs is not as reliable, our estimates suggest even less spending on average to the second and third rounds of EIPs. Our point estimates imply less short-term spending on average than in response to economic stimulus payments in 2001 or 2008. While our analysis lacks the power to measure longer-term spending effects, the lack of short-term spending contributed to strong household balance sheets as the direct economic effects of the pandemic on households waned.

Suggested Citation

  • Jonathan A. Parker & Jake Schild & Laura Erhard & David Johnson, 2022. "Economic Impact Payments and Household Spending During the Pandemic," NBER Working Papers 30596, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30596
    Note: EFG ME PE
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    References listed on IDEAS

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    Cited by:

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    3. Kozo UEDA, 2023. "Marginal Propensity to Consume to Two-Time Income Shocks," CIGS Working Paper Series 23-008E, The Canon Institute for Global Studies.
    4. repec:ags:aaea22:335676 is not listed on IDEAS
    5. James Graham & Robert A McDowall, 2024. "Mental Accounts and Consumption Sensitivity Across the Distribution of Liquid Assets," Working Papers 2024-07, University of Sydney, School of Economics.

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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G5 - Financial Economics - - Household Finance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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