Where to Go: The Japanese Government's Travel Subsidy during COVID-19
30 Pages Posted: 11 Dec 2020 Last revised: 20 Jun 2021
Date Written: December 10, 2020
Faced with the trade-off between preventing the spread of the coronavirus disease (COVID-19) and promoting economic recovery, in July 2020, the Japanese government launched the "Go To Travel" campaign (a subsidy for domestic travel) to revitalize its moribund tourism industry. This study examines (1) whether the government subsidy has driven individuals to travel, even at the risk of acquiring the infection, and (2) whether the government subsidy has caused the virus to spread. We utilize a difference-in-differences method by taking advantage of the fact that the government subsidy excluded travel to and from Tokyo in the period spanning July 2020 through September 2020. We demonstrate that the government subsidy has increased the number of domestic hotel guests. Additionally, more hotel guests traveled outside their prefectures and economic zones for sightseeing. Despite these increases in domestic travel, we find no evidence to support the view that the government subsidy has resulted in the spread of the infection.
Keywords: COVID-19, difference-in-differences, government subsidy, travel
JEL Classification: H24, I18, L83, Z38
Suggested Citation: Suggested Citation