Spending behavior and stimulus transfer use in response to income shocks among older Americans: evidence from the COVID-19 pandemic

ABSTRACT

This study examines household behavioural responses to the pandemic-induced income shocks regarding their overall spending and spending out of 2020 CARES stimulus payments. Using data from the 2020 Health and Retirement Study COVID-19 project and restricting our sample to older adults (51 years old and above), we show that the negative income shocks experienced during the COVID-19 pandemic put downward pressure on household spending. Results also reveal that, relative to those who did not experience an income shock, stimulus recipients who experienced income losses were more likely to use the stimulus transfer to increase spending, pay off debt, or for other purposes rather than to save.

KEYWORDS:

• Covid-19 pandemic
• income shock
• spending
• stimulus
• saving

JEL CLASSIFICATION:

• D14
• D90
• G40
• G51
• H310
• I38

Disclosure statement

No potential conflict of interest was reported by the author(s).