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Explaining the Income and Consumption Effects of COVID

Arpit Gupta, Anup Malani and Bartek Woda from New York University, Stern School of Business (Gupta) and the University of Chicago Law School (Malani and Woda) presented their paper "Explaining the Income and Consumption Effects of COVID" Their paper was discussed by Mushfiq Mobarak from the Yale School of Management. ............................................................. Paper Abstract The COVID-19 pandemic led to stark reductions in economic activity in India, as a result of voluntary and forced changes in behavior. The authors employ CMIE’s Consumer Pyramids Household Survey to examine the timing, distribution, and mechanism of the impacts from this shock on income and consumption. With regards to income, the authors document large drops in income even before lockdown policies and substantial heterogeneity in experiences. Some groups, particularly white-collar workers, saw virtually no loss; while incomes fell for nearly 90 percent for other groups such as daily laborers. Individuals compensated for loss of work in their typical jobs by seeking work in other sectors, with knock-on effects that compounded direct COVID losses in those other sectors. With regards to consumption, the data show that consumption fell even among those that did not experience income loss, suggesting precautionary savings and consumption behavior that reduced the distributive effects of COVID-19. Moreover, consumption of food and fuel fell less than consumption of durables such as clothing and appliances. Following Hamilton (2001), the authors estimate Engel curves and find that changes in consumption changes reflect large price shocks (rather than a retreat to subsistence) in sectors other than food and fuel. Future work will explore geographic heterogeneity in that price shock. ............................................................. About the Consumer Pyramids Research Seminar Series The Consumer Pyramids Research Seminar Series features work based on the Consumer Pyramids Household Survey. It is a platform for researchers to receive critical and technical feedback from accomplished peers. It is also meant to engage with the larger research community who may gain from technical discussions. The Consumer Pyramids Household Survey is India’s largest regular household survey and the world’s largest household panel survey. CPHS has collected data on over 232,000 households and 1.19 million individuals surveyed since 2014. The survey collects information on household demographics, individual identities, employment, health status, financial inclusion, individual and household incomes, consumption expenditures, ownership of assets and intentions to buy them, household amenities and consumer sentiments. Income and expenses data are a monthly time-series since January 2014. Record-level data from all 20 Waves of CPHS is available through a subscription service. Data from the May-Aug 2020 Wave of CPHS has already been released to subscribers. Please visit our website (https://consumerpyramidsdx.cmie.com) to learn more about CPHS and how to gain access to the record-level data. ............................................................. Contents: 0:00​ Intro and Announcements 2:16​ Presentation - Motivation 5:25​ Presentation - Facts about India's lockdown 7:20​ Presentation - Data 10:38​ Presentation - Changes to Income 27:50​ Presentation - Changes to consumption 48:41​ Discussant Presentation 1:03:28 Open Discussion