Title

Initial impacts of the pandemic on consumer behavior: Evidence from linked income, spending, and savings data

Author(s)

Natalie Cox Natalie Cox (Princeton Unviersity)

Peter Ganong Peter Ganong (University of Chicago)

Pascal Noel Pascal Noel (University of Chicago)

Joseph Vavra Joseph Vavra (University of Chicago)

Arlene Wong Arlene Wong (Princeton University)

Abstract

We use U.S. household-level bank account data to investigate the heterogeneous effects of the pandemic on spending and savings. Households across the income distribution all cut spending from March to early April. Since mid April, spending has rebounded most rapidly for low-income households. We find large increases in liquid asset balances for households throughout the income distribution. However, lower-income households contribute disproportionately to the aggregate increase in balances, relative to their pre-pandemic shares. Taken together, our results suggest that spending declines in the initial months of the recession were primarily caused by direct effects of the pandemic, rather than resulting from labor market disruptions. The sizable growth in liquid assets we observe for low-income households suggests that stimulus and insurance programs during this period likely played an important role in limiting the effects of labor market disruptions on spending.

Creation Date

2020-07

Section URL ID

Paper Number

2020-39

URL

https://bfi.uchicago.edu/wp-content/uploads/BFI_WP_202082.pdf

File Function

Jel

D12, D31, E21, E32, E62, G51, I12

Keyword(s)

U.S., Northern America, Consumer, Distribution, Households, Income, Income Distribution, Recession, Saving, Pandemic

Suppress

false

Series

13