News Release

Economic lessons learned from the pandemic: Study finds that blanket stimulus payments did not adequately consider local conditions

Peer-Reviewed Publication

Institute for Operations Research and the Management Sciences

Key Takeaways:

  • The CARES Act stimulus program did not adequately take into account fluctuations in the cost-of-living and inflation on a localized basis throughout the country.
  • Future such relief programs need to be more targeted according to local conditions.


CATONSVILLE, MD, March 10, 2022 – After states throughout America instituted general lockdowns for businesses, employers and residents when COVID-19 arrived in the United States in 2020, one of the first measures taken to offset the impact came when the U.S. Congress passed the CARES Act that was signed into law on March 27, 2020. That measure provided $4.4 trillion in assistance to businesses and individuals through “stimulus checks” that were sent to millions of qualifying U.S. citizens.

The stated purpose of the payments was to provide direct relief in the form of fiscal payments to families and individuals, and to boost the demand for goods and services by creating a “multiplier effect.”

A new study examined the results of the program and identified potential shortcomings, which when understood can shape future such relief measures.

The study to be published in the current issue of the INFORMS journal Marketing Science, “Frontiers: Impact of Stay-at-Home-Orders and Cost-of-Living on Stimulus Response: Evidence from the CARES Act,” is authored by Kanishka Misra of the University of California, San Diego, and Vishal Singh and Qianyun (Poppy) Zhang, both of New York University.

“We found that the stimulus resulted in an increase in spending, with most of the stimulus payments being spent within the first few days of receiving it,” says Misra. “We estimate recipients’ ‘Marginal Propensity to Consume’ (MPC) between 0.29 (excluding banking) and 0.51 (overall). In other words, for every dollar of stimulus received, between 29c and 51c were spent within the first four days.”

The researchers found that much of the increased spending centered on cash transactions and the purchase of necessities at grocery stores, with Walmart being one of the major beneficiaries of that increased spending.

“One of the potential shortcomings we identified was that the stimulus policies did not consider differences in local environments, particularly cost-of-living differences across the United States,” says Singh. “Under the CARES Act, all qualifying households received equal payments in spite of large differences in living costs for metropolitan cities versus rural towns.”

The study estimates large cross-sectional variation in the impact of the stimulus, with MPC estimates that are three times higher in the most densely populated urban areas with higher costs-of-living. Further, during the initial lockdown in the COVID-19 pandemic, the researchers estimate 60% higher MPCs in areas with more restricted movement (measured by Google workplace mobility).

“In the end, we found that the stimulus program could have been more effective if it had used targeted stimulus payments that were tied to local conditions, and that accounted for cost-of-living differences and local lockdown policy,” says Misra. “We believe these adjustments are likely to be more effective in stimulating the flow of money and yield higher multiplier effects, particularly in lower-income communities.”

The researchers followed the disbursement of stimulus payments using a large debit card database from Facteus that provided daily numbers of transactions and spending at the ZIP code level. The transactions were drawn from more than 1,000 financial institutions and aggregated over roughly 12 million cards. Total daily spending across all ZIP codes in the data was approximately $200 million.


Link to Study


About INFORMS and Marketing Science

Marketing Science is a premier peer-reviewed scholarly marketing journal focused on research using quantitative approaches to study all aspects of the interface between consumers and firms. It is published by INFORMS, the leading international association for the decision and data sciences. More information is available at or @informs.


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