The Korean Journal of Economic Studies
The Effect of Child Support Payment Coupons in Response to COVID-19 on Household Spending
Chulhee Lee (Seoul National University) and Sujin Lee (Seoul National University)Year 2021Vol. 69No. 3
AbstractThis paper examines the household spending effects of child support payment coupons in South Korea, which were granted to subsidize households suffering from COVID-19. The results of difference-in-differences estimation suggest that child support payment coupons increased household spending by a weekly average of 22,355 South Korean Won (KRW) over 10 weeks, which is 8.8% of the treatment group’s average consumption for the period of analysis. Child support payment coupons have positive impacts on supporting both children and small-scale business-owners. The effect on household spending is shown to be significantly larger for low-income households, compared to that of the top 20% of households. We find that coupon redemption replaces some of the household spending that would occur if there was no support from the government. The size of the net effect (weekly average of 22,355 KRW over 10 weeks) is determined by the difference between coupon redemption (57,620 KRW) and the size of the substitution effect (35,256 KRW). These results imply that the net effect of the coupons is estimated to be approximately 39% of the coupon redemption for 10 weeks. We also discuss the implications of our findings on the effects and design of government subsidies.