After Across-the-Board Decline, Consumer Spending
Has Rebounded Fastest for Low-Income Households
Consumer purchases in late March 2020 were more than 35 percent lower than in the same period the previous year, according to detailed data on household credit and debit card charges and banking transactions. While the drop occurred in all income groups, and all groups subsequently recovered, by late May, spending by those in the lowest income quartile was only 10 percent lower than a year earlier, while spending by highest quartile households remained down by over 20 percent. Faculty Research Fellows Peter Ganong, Joseph Vavra, and Arlene Wong, and their collaborators Natalie Bachas, Diana Farrell, Fiona Greig, and Pascal Noel, report these findings, and also document a sharp increase in liquid balances for many households, in a recent working paper (27617). Wong summarizes their findings in the short video above.
Five NBER working papers distributed this week examine the economic impact of the COVID-19 pandemic and various policy responses to it. The studies analyze how the $600 unemployment insurance supplement in the CARES Act affected consumer spending (27576), present cross-country evidence on the effect of programs designed to keep businesses afloat through the pandemic (27637), estimate the impact on restaurant traffic of lifting lockdown provisions (27650), explore the role of fintech firms as substitutes for traditional banks in serving firms that benefit from the Paycheck Protection Program (27659), and describe gender-related differences in the pandemic’s labor market effects (27660).
More than 210 NBER working papers have presented pandemic-related research. These papers are open access and have been collected for easy reference. View them in reverse chronological order or by topic area.
In a study of spending patterns in 31 countries, the personal budget share spent in the informal sector steeply declines at higher income levels, according to Pierre Bachas, Lucie Gadenne, and Anders Jensen. This makes consumption taxes on goods purchased in the formal sector progressive, in that households in the richest quintile face an effective tax rate twice that of the poorest quintile.
Following a buyout, target firms increase sales 50 percent more than matched control firms, primarily by launching new products and expanding geographically into new markets, a study by Cesare Fracassi, Alessandro Previtero, and Albert W. Sheen finds.
In a field experiment with 57,910 US homeowners who recently put their houses on the market, Nicolas L. Bottan and Ricardo Perez-Truglia find that a 1 percentage point increase in the seller’s home price expectations was associated with a 2.5 percentage point decline in the probability of selling the home within six months.
The 2020 Methods Lectures introduce differential privacy, a method of assessing the trade-off between releasing more-detailed information based on survey responses and protecting respondents' privacy, and illustrate its application in several settings. The lectures and associated slides are available to view online or download.
Since the onset of the COVID-19 pandemic, Americans are eating at home more and moving around less — changes that are not reflected in the Consumer Price Index weightings of important spending categories, and which could mean US inflation is being understated, according to a study summarized in the August edition of The NBER Digest. Also featured in this issue of The Digest are working papers focusing on long-term outcomes of efforts to mandate equality in China, the environmental-justice effects of California’s carbon market, benefits for the very young of food-stamp availability, reactions of diners to having
calorie data posted on menus, and the role of fear of COVID-19 in suppressing economic activity.
The summer issue of the Bulletin on Health features two studies that introduce methods for using currently available information to better understand COVID-19 infection rates and the implied infection fatality rates. One paper generates upper and lower bounds on the rates of COVID-19 infection under minimal assumptions, and finds that these bounds are necessarily wide, due to the small proportion of the population that has been tested. The second paper leverages additional assumptions and data, such as travel patterns from the virus epicenters, to infer infection rates. Although the studies take different approaches, they both indicate that infection fatality rates are considerably lower than the fatality rates among confirmed COVID-19 cases. Also featured in this issue of the free Bulletin on Health are a study of the long-term impacts of OxyContin’s reformulation on fatal drug overdoses, a study of the role of Medicaid coverage in reducing infant mortality during flu pandemics, and a profile of NBER research associate Doug Almond.
New NBER affiliates are appointed through a highly competitive process that begins with a call for nominations in January. Candidates are evaluated based on their research records and their capacity to contribute to the NBER's activities by program directors and steering committees. New affiliates must hold primary academic appointments in North America. On January 1, 2020, there were 1,581 NBER-affiliated researchers based at 180 institutions.