Institutional Affiliation: Chinese Academy of Social Science
|"Quick Response" Economic Stimulus: The Effect of Small-Value Digital Coupons on Spending|
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We study a new consumption stimulus model that leverages mobile payment platforms to dispense massive amounts of small-value, use-it-this-week-or-lose-it digital coupons. We evaluate the effects of one such program in a large Chinese city using novel data of mobile platform transactions of 1 million program participants. Exploiting participants’ rush to the first-come, first-served digital portal, we compare spending among those who barely won coupons to those who barely lost because of minor differences in the timing of their arrival at the portal. We find that coupons generate an immediate increase in weekly consumption among winners by $3 additional out-of-pocket spending for every $1 in government subsidy. Analysis of business customer flows suggests that coupons distort consumption to...