Consumption Stimulus with Digital Coupons

TL;DR

This paper analyzes a large-scale digital coupon program in China, revealing significant short-term consumption boosts, behavioral factors influencing responses, and the benefits of targeted and hybrid distribution strategies for efficiency and equity.

Contribution

It provides empirical evidence on the effectiveness and heterogeneity of digital coupon stimulus programs, and proposes optimized targeting strategies.

Findings

Each ¥1 subsidy induces ¥3.4 in consumer spending.

Consumption responses vary based on demand and supply factors.

Targeting responsive consumers can double stimulus effects.

Abstract

We study consumption stimulus with digital coupons, which provide time-limited subsidies contingent on minimum spending. We analyze a large-scale program in China and present five main findings: (1) the program generates large short-term effects, with each $\yen$1 of government subsidy inducing $\yen$3.4 in consumer spending; (2) consumption responses vary substantially, driven by both demand-side factors (e.g., wealth) and supply-side factors (e.g., local consumption amenities); (3) The largest spending increases occur among consumers whose baseline spending already exceeds coupon thresholds and for whom coupon subsidies should be equivalent to cash, suggesting behavioral motivations; (4) high-response consumers disproportionately direct their spending toward large businesses, leading to a regressive allocation of stimulus benefits; and (5) targeting the most responsive consumers can double total stimulus effects. A hybrid design combining targeted distribution with direct support to small businesses improves both the efficiency and equity of the program.