DP15416 Subsidizing the spread of COVID19: Evidence from the UK's Eat-Out-to-Help-Out scheme

Author(s): Thiemo Fetzer
Publication Date: October 2020
Keyword(s): consumer spending, Coronavirus, Externalities, health, Subsidies
JEL(s):
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15416

This paper documents that a large-scale government subsidy aimed at encouraging people to eat out in restaurants in the wake of the first 2020 COVID19 wave in the United Kingdom has had a large causal impact in accelerating the subsequent second COVID19 wave. The scheme subsidized 50% off the cost of food and non-alcoholic drinks for an unlimited number of visits in participating restaurants on Mondays-Wednesdays from August 3 to August 31, 2020. Areas with higher take-up saw both, a notable increase in new COVID19 infection clusters within a week of the scheme starting, and again, a deceleration in infections within two weeks of the program ending. Areas that exhibit notable rainfall during the prime lunch and dinner hours on days the scheme was active record lower infection incidence - a pattern that is also measurable in mobility data - and non-detectable on days during which the discount was not available or for rainfall outside the core lunch and dinner hours. A back of the envelope calculation suggests that the program is accountable for between 8 to 17 percent of all new local infection clusters during that time period.