IMF Working Papers

Micro-Evidence on the Consumption Impact of Income-Support Policies During COVID-19

By Metodij Hadzi-Vaskov, Emiliano Luttini, Luca A Ricci

April 4, 2025

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Format: Chicago

Metodij Hadzi-Vaskov, Emiliano Luttini, and Luca A Ricci. "Micro-Evidence on the Consumption Impact of Income-Support Policies During COVID-19", IMF Working Papers 2025, 064 (2025), accessed June 22, 2025, https://doi.org/10.5089/9798229006866.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Income-support policies can boost consumption during a catastrophic episode like the COVID-19 pandemic. Using data on Chilean municipalities, we investigate the impact on private consumption of income-support policies, such as lump-sum transfers and withdrawals of funds from the contributors’ mandatory pension accounts. We find that both emergency income and pension withdrawals had statistically significant effects with an estimated average marginal propensity to consume of about 20 percent. Consumption of durable goods is more sensitive to these policies than other goods, especially in the programs’ initial stages. Higher educational attainment and financial leverage, proxying better access to bank credit, are associated with weaker consumption reaction across municipalities.

Subject: Consumption, COVID-19, Expenditure, Health, Income, Labor, National accounts, Pension spending, Pensions

Keywords: Consumption, Consumption of durable goods, COVID-19, Covid-policies, Emergency Family Income program data, Global, Income, Income support programs, Income-support policy, Income-support program, Labor income, Marginal propensity to consume, Pension spending, Pension withdrawals, Pensions, Program beneficiary, Ricardian equivalence

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