Consumer-Financed Fiscal Stimulus: Evidence from Digital Coupons in China

Ding, Jing; Jiang, Lei; Msall, Lucy; Notowidigdo, Matthew J.

doi:10.1257/aeri.20240210

Abstract

In 2020, local governments in China began issuing digital coupons to stimulate spending in targeted categories such as restaurants and supermarkets. Using data from a large e-commerce platform and a bunching estimation approach, we find that the coupons caused large increases in spending of 3.1鈥�3.3 yuan per yuan spent by the government. The large spending responses do not come from substitution away from non-targeted spending categories or from short-run intertemporal substitution. To rationalize these results, we develop a dynamic consumption model showing how coupons鈥� minimum spending thresholds create temporary notches that lead to large spending responses.

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