DP17058 Spending effects of child-related fiscal transfers

Author(s):	Olga Goldfayn-Frank, Vivien J. Lewis, Nils Wehrhöfer
Publication Date:	February 2022
Date Revised:	May 2022
Keyword(s):	child bonus, COVID-19, fiscal stimulus, household spending, marginal propensity to consume, Pandemic, transfer
JEL(s):	D12, E21, E62, H24, H31
Programme Areas:	Public Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=17058

As part of Germany's fiscal response to the Covid-19 pandemic, parents received three payments totalling 450 euros per child. Randomization in the payment dates and daily scanner data allow us to identify the effects of these transfers on household spending. We find a significant but small spending effect of the first transfer, with an estimated marginal propensity to consume of about 12%. The effect is higher for low-income and liquidity-constrained households, and in areas with lower infection rates. The second and third payment failed to increase spending. Our results indicate that the child bonus was redistributive rather than stimulative.