BOK: Last Year's Consumption Coupons Raised GDP by 0.12%... 'Maximizing Effectiveness' Requires Precise Policy Design

BOK Issue Note: Assessing the Economic Effects of Livelihood Recovery Consumption Coupons
Receiving a 100,000 Won Coupon Leads to 20,000 Won in Additional Consumption
Coupon Effects Last 1–2 Months, Stronger Impact in Non-Metropolitan Regions an

The government's livelihood recovery consumption coupons, which were distributed to all citizens last year, had a positive impact on household consumption and sales at participating businesses, resulting in a 0.12% increase in gross domestic product (GDP). However, some have pointed out that since this is a policy suitable for short-term relief, it is necessary to carefully design the timing of implementation, the method of differentiated support, and eligible spending outlets in order to maximize its economic effectiveness.

According to the "BOK Issue Note: Economic Impact Assessment of Livelihood Recovery Consumption Coupons (Ha Jeongseok, Yang Junbin, Kim Namjoo, Ryu Jeongseok, Jo Insik)" released by the Bank of Korea on June 10, the marginal propensity to consume (MPC) for the consumption coupons was found to be 0.20. This means that, on average, households that received a coupon worth 100,000 won increased their new consumption by about 20,000 won. This is slightly lower than the estimated MPC for COVID-19 consumption support funds, which ranged from 0.19 to 0.42.

Previously, the government provided consumption coupons in two rounds last year, distributing them as credit cards, local gift certificates, and prepaid cards. The Bank of Korea built a big data system based on credit card sales—where usage amounts could be tracked—to measure the effect on sales, and conducted two rounds of self-reported survey questionnaires to examine the impact on stimulating consumption.

By income level, the MPC of the consumption coupons tended to be higher among lower-income households. For the bottom 20% income group, the MPC was 0.25, while for the top 20%, it was only 0.17. Regarding the timing of use, 88.8% of the first round of coupons and 72% of the second round were used within four weeks of distribution.

On average, monthly sales at outlets accepting the consumption coupon increased by 2.91% more than at non-participating outlets. By region, sales at participating businesses in non-metropolitan areas and regions experiencing population decline rose by 6.37% and 5.51%, respectively, showing a much greater effect compared to the metropolitan area, which recorded a -0.04% change. Ha Jeongseok, Manager of the Fiscal Industry Team at the Bank of Korea's Economic Statistics Department, explained, "There was a higher amount of coupon distribution in non-metropolitan and rural population-declining areas, while in the metropolitan area, sales at non-participating outlets remained relatively resilient, resulting in a smaller gap in sales between participating and non-participating businesses."

By industry, the largest increases in sales were seen at general merchandise stores such as clothing, groceries, and opticians (up 8.32%), general restaurants (up 5.84%), and the leisure and recreation sector (up 5.39%). In contrast, sales at private educational institutions (down 9.25%) and hospitals/clinics (down 5.91%) at participating outlets decreased compared to non-participating outlets. The Bank of Korea attributed this to the fact that as households' disposable income increased, they tended to spend more at larger establishments such as hospitals and clinics. In terms of duration, the effect of the coupons lasted for about two months following the first (larger) distribution, and for about one month after the second distribution.

Nationwide, the additional sales generated at participating outlets by the consumption coupons distributed as credit cards was estimated to be about 2.8 trillion won out of a total of 9.1 trillion won (30.9%). Taking into account both increased sales at participating outlets and the overall boost to household consumption, the Bank of Korea estimated that last year's livelihood recovery consumption coupons contributed approximately 0.12% (ranging from 0.07% to 0.15%) to annual GDP growth.

Experts have stressed that to maximize the economic impact of future consumption coupons, careful planning is needed regarding the timing of the policy, the method of differentiated support, and eligible spending outlets. Manager Ha noted, "The policy path in which increased household disposable income from the coupons led to actual spending and higher sales at participating businesses worked effectively to raise the economic growth rate." He also commented, "There is a certain effect from differentiation by income level," adding, "We need to carefully consider how and by how much to differentiate distribution by both income and region."

This content was produced with the assistance of AI translation services.