The Korean Journal of Economic Studies
The Consumption Effect of the Emergency Income Aids in 2020: Evidence from the Household Income and Expenditure Survey
Woojin Lee (Korea Univeristy), Changhui Kang (Chung-ang University) and Seokjin Woo (Myongji Univeristy)Year 2022Vol. 70No. 1
This paper examines the effectiveness of the government’s large-scale income support policy by estimating the consumption effect of the emergency income aids that the Korean government paid to its households in the second and third quarters of 2020. Unlike the previous studies, which use information on credit card transactions, this study employs the Household Income and Expenditure Survey dataset provided by the National Statistical Office; the latter measures the total amount of household consumption more accurately than the former.Our difference-in-difference estimates suggest that the marginal propensity to consume (MPC) of the emergency aids ranges between 0.362 and 0.421 in the second quarter and between 0.401 and 0.481 in the third quarter of 2020. The MPC estimates for the entire period (the second and third quarters in total) range between 0.654 and 0.782. In magnitude, the MPC estimates of this paper lie in the middle among the estimates reported by the previous studies in Korea, and are similar to the MPC estimate (0.666) based upon the 2001 federal income tax refund of the United States.