Each American is $ 1200: how one -time payments in the United States soften the blow to the economy

Direct cash payments to the population allow you to support consumption in the crisis, softening the blow to the economy. Every $ 1 payments to American families increased their consumption by $ 0.29, in the early days the costs increased 1.5–2.5 times, the study showed, which is discussed by Econs.online . This week, direct payments to some categories of citizens werepromised in Russia, but there is still ahead to evaluate their effectiveness.

Cash payments

Cash payments to the population are one of the instruments used by governments in response to recession: these payments are designed to soften the consequences of the crisis due to the multiplier effect - when households increase consumption, this leads to an increase in production and employment. The effectiveness of such fiscal stimuli depends on the maximum inclination of households to consumption (Marginal Propensity to Consume, MPC) is an indicator that determines how much consumer expenses have grown in response to an increase in its disposable income. The value of the indicator can be from 0 to 1.

The 2020 Cares ACT adopted at the end of March suggests that $ 2 trillion is allocated for “coronavirus” payments to the population and business. This stimulating package includes, among other things, direct cash payments to households, each adult and $ 500 per child (with an annual individual income of up to $ 75,000; if it is larger, there is no more payment, there is no annual income of $ 99,000 payments). The criterion for obtaining direct cash payments corresponds to the vast majority of Americans (see insert). Payments began on April 9 , and the difference between the consumer behavior of those who received them, and those who have not yet received were radical, found Scott Baker from the school of management named after Kellogg School of Management) and its co -authors. But at the same time, the reaction of the recipients differs significantly depending on their financial situation.

Households and income

According to the latest US Census data , in 2018, the median annual income of households in the United States amounted to a little more than $ 63,000 (median - that is, half of households, half less have it less); The income of up to $ 75,000 has 57.1% of households, up to $ 99,999 - 69.6%. According to US Census, in the USA in 2018 there were 128.579 million households , that is, an average of 2.5 people in each. In March 2020, when the United States began to introduce Lockdown, the expenses of American households fell on the record since 1959 7.5% in monthly terms ($ 1.13 trillion), and the disposable personal income was 2% .

For only the first 10 days, the MPC received monetary support amounted to an average of 0.29, that is, in response to every $ 1 stimulating payments, recipients increased expenses by $ 0.29, which is statistically and economically significant. The costs increased instantly, on the day of receipt of payment, and were aimed mainly to the most necessary - the purchase of food and household goods, payment of rent and accounts. During the pandemic, the recipients of payments spend faster and more than during the crisis of 2008-2009, when the Americans sent 12-30% of the received anti -crisis assistance during the first three months at priority expenses are compared by researchers.

Recipients of payments

To study Baker and his co -authors used information about cash transactions of Saverlife mobile application users, which helps to save money and provides free financial consultations. Most users bind their main bank account to the application.

Users of this application, as a rule, are not rich - the average annual income in the sample (see insert) is about $ 25,000. Most have an extremely low account balance - the median amount of residues was only $ 141. By April 28, about 28% of users entered the sample received stimulating cash payment from the government.

Sample recipients

Researchers studied the depersonalized data of transactions and balance 44,660 users of the Saverlife application from all over the United States for August 2016 - April 2020 inclusive, leaving 5746 people in the final sample, in January -March 2020, who replenished several transactions per month at least $ 1000.

Prior to support, a typical recipient in the sample of researchers spent less than $ 100 per day, in the first days after receiving the payment, expenses increased to $ 150–250 per day.

For each of the expenses studied - food products, payment of housing and accounts, home -made goods - expenses increased by $ 50–75 for three days, for long -term goods - by $ 20. In general, on the very first day of receipt of payment and the next nine days, people in response to each $ 1 increased by daily expenses by $ 0.25-0.35.

Saverlife data allowed researchers to divide its users into groups depending on the level of income, the depth of its fall and the size of the “airbag” - the amount of funds in the account, in order to compare the consumer reaction to assistance in people with different material conditions.

It is expected that the highest marginal tendency to consumption was among recipients with the smallest income and with its greatest fall. Users who earn less than $ 1000 per month were spent twice as much as paying than earn $ 5,000 or more. Those who have income during the pandemic have not changed, MPC amounted to 0.15; For whom the income decreased half or more - 0.25.

But the difference in the scale of the effect of payments depended on the size of the balance of the recipient of monetary assistance. Those who have less than $ 500 in April left in the account: on average, an additional $ 0.4 for every $ 1 support received. The level of expenses of those who had more than $ 3,000 in the account was practically not changed upon receipt of cash payments.

The response to fiscal stimuli is wide, but heterogeneous, and the researchers conclude the greatest effect to those who have the least savings. The current crisis differs from all previous ones in the rapid development of development: people actually did not have time to reduce expenses and start saving in order to prepare for the Locks and a decrease or loss of income, the authors of the study explain. The results of the study, they hope, can be taken into account when making decisions about the possible following steps in an unprecedented situation that the economy has encountered.

At the same time, the authors indicate, when making decisions on targeted payments, it is necessary to take into account possible behavioral effects. For example, unemployment benefits can increase its duration: now about 40% of those who have lost their jobs receive payments by Cares ACT, exceeding the amount of previous earnings, which may make it difficult to restore employment after the Locks. In the same way, the targeted anti -crisis payments to those who have few accumulations can destroy the savings.

In 2008-2009, anti -crisis payments in the United States (up to $ 600 per person and $ 300 per child) helped maintain demand for several months, during the first three, the Americans spent 50–90% of support received from the state for the purchase of long -term goods, primarily vehicles. During the pandemic, due to the Locdows, the availability of these goods is limited, as well as the ability to use them, the authors note, and the main expenses are aimed at current needs, including increased expenses for food delivery from restaurants ongoing work.

Each American is $ 1200: how one -time payments in the United States soften the blow to the economy

Cash payments

Recipients of payments

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