Discussion paper

DP15283 Optimal Allocation of the COVID-19 Stimulus Checks

Congress spent $250B sending stimulus checks to individuals. Could the same stimulus have been achieved for less, assuming the government's information is restricted to 2019 tax returns? Using a life-cycle consumption-saving model with heterogeneous consumers, we calculate the consumption responses to $100 increments of cash transfers by, e.g., marital status, income, and number of children. We find the optimal allocation under different constraints using a new algorithm that can rank an arbitrarily-large number of possible allocations. The optimal policy roughly doubles the amount for low-income and younger consumers and can achieve the same stimulus at almost half the cost.


Nygaard, V, B Sørensen and F Wang (eds) (2020), “DP15283 Optimal Allocation of the COVID-19 Stimulus Checks”, CEPR Press Discussion Paper No. 15283. https://cepr.org/publications/dp15283