"Quick Response" Economic Stimulus: The Effect of Small-Value Digital Coupons on Spending
We study a new consumption stimulus model that leverages mobile payment platforms to dispense massive amounts of small-value, use-it-this-week-or-lose-it digital coupons. We evaluate the effects of one such program in a large Chinese city using novel data of mobile platform transactions of 1 million program participants. Exploiting participants’ rush to the first-come, first-served digital portal, we compare spending among those who won coupons to those who lost because of minor differences in the timing of their arrival at the portal. We find that coupons generate an immediate increase in weekly consumption among winners by $3 additional out-of-pocket spending for every $1 in government subsidy. Coupon-winning consumers practice intertemporal substitution by moving up purchases that would have been made months in the future. Analysis of business customer flows suggests that coupons distort consumption toward more expensive options, leading the program to disproportionately favor big firms that sell pricier goods and services. Relaxing coupons’ minimum spending requirements would alleviate such distributional concern without sacrificing consumer welfare. We conclude that the coupon model can be a useful addition to policy makers’ stimulus toolbox.
We thank Panle Jia Barwick, Dan Bernhardt, Karen Brandon, Mark Colas, Jonathan M.V. Davis, Mike Kuhn, Shanjun Li, Emi Nakamura, Nolan Miller, and anonymous referees for helpful comments. We thank Shiping Wang, Fang Wang, and Zhiyun Cheng at Ant Financial for generous technical support, and Jiming Wang and Junting Chen for excellent research assistance. None of the research findings are subject to corporate review prior to dissemination; the content is solely the responsibility of the authors and does not represent the view of Ant Financial or the National Bureau of Economic Research.
Jianwei Xing & Eric Yongchen Zou & Zhentao Yin & Yong Wang & Zhenhua Li, 2023. "“Quick Response” Economic Stimulus: The Effect of Small-Value Digital Coupons on Spending," American Economic Journal: Macroeconomics, vol 15(4), pages 249-304.