Stimulating Consumption at Low Budget: Evidence from a Large-Scale Policy Experiment Amid the COVID-19 Pandemic

Qiao Liu (), Qiaowei Shen (), Zhenghua Li () and Shu Chen ()
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Qiao Liu: Guanghua School of Management, Peking University, 100871 Beijing, China
Qiaowei Shen: Guanghua School of Management, Peking University, 100871 Beijing, China
Zhenghua Li: Research Institute, Ant Group, 310013 Hangzhou, China
Shu Chen: Research Institute, Ant Group, 310013 Hangzhou, China

Management Science, 2021, vol. 67, issue 12, 7291-7307

Abstract: We use a novel panel with detailed transaction records of more than one million de-identified individuals to study the effect of a large-scale Chinese government-issued digital coupon program on consumer spending. Exploiting a difference-in-differences approach, we find that the digital coupon is highly effective in stimulating consumption. An effective government subsidy of RMB 1 can drive excess spending of RMB 3.4 to RMB 5.8, and the effect persists across multiple coupon issuance waves. In explaining the results, we find that a behavioral model with mental accounting and loss aversion can match the empirical evidence from the field. Our analysis, by illustrating the importance of embedding behavioral factors into the design and implementation of public policy, informs the current debate about cost-effective policy tools to recover the economy.

Keywords: fiscal stimulus program; digital coupon; behavioral economics; policy experiment; MPC (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:12:p:7291-7307

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