"Quick Response" Economic Stimulus: The Effect of Small-Value Digital Coupons on Spending / Jianwei Xing, Eric Zou, Zhentao Yin, Yong Wang, Zhenhua Li.

Format:

Book

Author/Creator:

Xing, Jianwei.

Contributor:

National Bureau of Economic Research.

Zou, Eric.

Yin, Zhentao.

Wang, Yong.

Li, Zhenhua.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27596.

NBER working paper series no. w27596

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

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.

Notes:

Print version record

July 2020.