Micro-Evidence on the Consumption Impact of Income-Support Policies During COVID-19

Metodij Hadzi-Vaskov, Emiliano Luttini and Luca Ricci

No 2025/064, IMF Working Papers from International Monetary Fund

Abstract: Income-support policies can boost consumption during a catastrophic episode like the COVID-19 pandemic. Using data on Chilean municipalities, we investigate the impact on private consumption of income-support policies, such as lump-sum transfers and withdrawals of funds from the contributors’ mandatory pension accounts. We find that both emergency income and pension withdrawals had statistically significant effects with an estimated average marginal propensity to consume of about 20 percent. Consumption of durable goods is more sensitive to these policies than other goods, especially in the programs’ initial stages. Higher educational attainment and financial leverage, proxying better access to bank credit, are associated with weaker consumption reaction across municipalities.

Keywords: Covid-policies; Marginal propensity to consume; Pension withdrawals; Income support programs; Ricardian equivalence (search for similar items in EconPapers)
Pages: 52
Date: 2025-04-04
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