Can Stimulus Checks Boost an Economy Under COVID-19? Evidence from South Korea

18 Pages Posted: 10 Aug 2020

See all articles by Moon Jung Kim

Moon Jung Kim

Korea Institute of Public Finance

Soohyung Lee

Seoul National University

Abstract

Various countries have implemented transfer programs to individuals since the Covid-19 outbreaks. However, the extent to which such transfers alleviate economic recessions is unclear. This paper analyzes a South Korean program, which provided vouchers redeemable only at small local businesses. We find that, due to the program, over 30% of households across all income groups increased their food and overall household spending, but the usage restriction may have affected consumer choice, distorting business competition. While the employment and sales of small businesses improved, the program's fiscal sustainability is in question because of the large tax exemption.

Keywords: COVID-19, stimulus payment, universal transfers, consumption, distortion

JEL Classification: H2, H6, D3, D6, L1

Suggested Citation

Kim, Moon Jung and Lee, Soohyung, Can Stimulus Checks Boost an Economy Under COVID-19? Evidence from South Korea. IZA Discussion Paper No. 13567, Available at SSRN: https://ssrn.com/abstract=3669496

Moon Jung Kim (Contact Author)

Korea Institute of Public Finance ( email )

79-6 Garak-Dong, Songpa-Ku
Seoul
United States

Soohyung Lee

Seoul National University ( email )

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