Household Spending Responses to the Economic Impact Payments of 2020: Evidence from the Consumer Expenditure Survey
Using the Consumer Expenditure Survey and variation in amount, receipt, and timing of receipt of Economic Impact Payments (EIPs) authorized by the CARES Act, this paper estimates that people spent less of their EIPs in the few months following arrival than in similar previous policy episodes and than estimated by existing studies using other types of data. Accounting for volatility during the pandemic and comparing the consumer spending behavior of broadly similar households, people spent roughly 10 percent (standard error 3.4) of their EIPs on non-durable goods and services in the three months of arrival, with little evidence of additional spending in the subsequent three months or on durable goods. People who report mostly spending their EIPs spent 14.3\% (3.7) of their EIPs compared to 5.9\% (8.3) and -1.6\% (5.0) for those who report mostly paying off debt and saving respectively. People with low liquid wealth and people receiving their EIPs on debit cards spent at higher rates: 21.7\% (6.4) and 36.8\% (24.6) respectively, with economically larger estimates for total spending.
Jianmeng Lyu provided truly excellent research assistance. For useful discussions we thank Peter Ganong, Thesia Garner, Jianmeng Lyu, and Claudia Sahm. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.