How Does Household Spending Respond to an Epidemic? Consumption During the 2020 COVID-19 Pandemic

36 Pages Posted: 1 Apr 2020 Last revised: 21 Apr 2020

See all articles by Scott R. Baker

Scott R. Baker

Northwestern University, Kellogg School of Management, Department of Finance

R.A. Farrokhnia

Columbia Business School - Finance and Economics; Advanced Projects & Applied Research in Fintech

Steffen Meyer

University of Southern Denmark - Department of Business and Economics; Danish Finance Institute

Michaela Pagel

Columbia University - Columbia Business School

Constantine Yannelis

University of Chicago Booth School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: March 31, 2020

Abstract

We explore how household consumption responds to epidemics, utilizing transaction-level household financial data to investigate the impact of the COVID-19 virus. As the number of cases grew, households began to radically alter their typical spending across a number of major categories. Initially spending increased sharply, particularly in retail, credit card spending and food items. This was followed by a sharp decrease in overall spending. Households responded most strongly in states with shelter-in-place orders in place by March 29th. We explore heterogeneity across partisan affiliation, demographics and income. Greater levels of social distancing are associated with drops in spending, particularly in restaurants and retail.

Keywords: Consumption, Coronavirus, COVID-19, Household Finance, Transaction Data

JEL Classification: D14, E21, G51

Suggested Citation

Baker, Scott R. and Farrokhnia, R.A. and Meyer, Steffen and Pagel, Michaela and Yannelis, Constantine, How Does Household Spending Respond to an Epidemic? Consumption During the 2020 COVID-19 Pandemic (March 31, 2020). Available at SSRN: https://ssrn.com/abstract=3565521 or http://dx.doi.org/10.2139/ssrn.3565521

Scott R. Baker (Contact Author)

Northwestern University, Kellogg School of Management, Department of Finance ( email )

Evanston, IL 60208
United States

R.A. Farrokhnia

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Advanced Projects & Applied Research in Fintech ( email )

3022 Broadway
New York, NY 10027
United States

HOME PAGE: http://fintech.gsb.columbia.edu

Steffen Meyer

University of Southern Denmark - Department of Business and Economics ( email )

DK-5230 Odense
Denmark

Danish Finance Institute ( email )

Michaela Pagel

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Constantine Yannelis

University of Chicago Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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