Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/230393
Authors: 
Karger, Ezra
Rajan, Aastha
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 2020-15
Abstract: 
We identify 16,016 recipients of Covid-19 Economic Impact Payments in anonymized transaction-level debit card data from Facteus. We use an event study framework to show that in the two weeks following a sudden $1,200 payment from the IRS, consumers immediately increased spending by an average of $577, implying a marginal propensity to consume (MPC) of 48%. Consumer spending falls back to normal levels after two weeks. Stimulus recipients who live paycheck-to-paycheck spend 68% of the stimulus payment immediately, while recipients who save much of their monthly income spend 23% of the stimulus payment immediately. Consumer age and location are only marginally correlated with individual MPCs after controlling for each individual's pre-pandemic propensity to save. We use the 2018 American Community Survey to re-weight our data to match the U.S. population. Ignoring equilibrium effects and assuming a constant MPC for each person, we estimate that the CARES Act's $296 billion of payments to individuals will increase consumer spending by $138 billion (47% of total outlays). A stimulus bill of the same size targeted at individuals with the highest MPCs would have instead increased consumer spending by $201 billion (68% of total outlays).
Subjects: 
Covid-19
stimulus payments
high-frequency data
marginal propensity to consume
JEL: 
D04
D12
E21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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