An analysis found that the first round of consumption coupons paid out last year helped improve sales, mainly for micro and small business owners. The effect was found to be stronger in non-capital regions, where consumers have relatively less spending power.
Han Sun-young, associate research fellow at the Korea SMEs & Startups Institute (KOSI), released this analysis on the 16th in a report titled "The consumption-boosting effect of consumption coupons — focusing on micro and small business owners and regional differences."
The first-round consumption coupons were provided to the entire population to counter sluggish domestic demand and a downturn among the self-employed. To concentrate spending on small business owners, the places where the coupons could be used were limited to certain industries and enterprises below a specified sales size. The study analyzed changes in sales before and after the coupon payout using weekly card sales data from about 2.49 million BC Card individual-merchant affiliates.
The study found that overall card sales continued to decline even after the payout. However, the drop narrowed from –6.79% before the payout to –4.21% after. Industries where the consumption coupons could be used saw their sales growth rate increase from 2.03% before the payout to 4.40% after.
By sales size, enterprises with sales of 500 million won or less saw the largest improvement in the card sales change rate, at 5.99 percentage points. The institute interpreted this as a clear sales improvement effect from the consumption coupons among micro enterprises. In everyday-life industries such as restaurants, supermarkets, and beauty services, the coupon usage rate was in the 5%–18% range.
By region, the policy effect was relatively larger in non-capital areas than in the capital region. In Daegu, a region with lower per capita gross regional domestic product (GRDP), the sales improvement reached 4.10 percentage points, and Gwangju recorded 16.93 percentage points, the highest among all regions. In the capital region, the improvement was modest: 1.74 percentage points in Seoul, 1.22 percentage points in Incheon, and 0.84 percentage points in Gyeonggi.
In the research process, to accurately identify the policy effect, a hypothetical sales trajectory without the coupons was constructed for comparison. Based on the sales trend before the coupon payout, a synthetic comparison group was built by combining industries where coupon use was restricted and was then compared with the policy-targeted industries.
As a result, the policy effect held even after controlling for external economic factors. The estimated regional policy effects were 14.93 percentage points in Honam and 9.96 percentage points in Chungcheong, surpassing the capital region (4.00 percentage points).
Han said, "These findings show that, among groups and regions with limited spending power, a cash-like transfer approach to boosting consumption can lead to improved sales."
Han added, "The clear sales improvement observed among micro and small business owners and in regions with relatively small economies suggests that tailoring to the characteristics of policy targets is important when designing future measures to revive domestic demand."