WHAT DRIVES CONSUMERS to stockpile household goods during a pandemic? Researchers everywhere have studied the phenomenon that emptied shelves of toilet paper and many other items this past spring. According to five researchers, such behavior reflects the human need to be prepared in the face of uncertainty. But it’s less understood who is more likely to stockpile in a crisis, and when.
A new working paper is one of many that have taken a closer initial look at stockpiling behavior during the COVID-19 pandemic. The paper’s co-authors include Scott Baker of Northwestern University’s Kellogg School of Management in Evanston, Illinois; R.A. Farrokhnia and Michaela Pagel of Columbia Business School in New York City; Constantine Yannelis of the University of Chicago Booth School of Business in Illinois; and Steffen Meyer of the department of business and economics at the University of Southern Denmark in Odense.
The co-authors examined the transaction data of 4,735 U.S.-based users of a nonprofit financial management app. Without linking attributes to specific users, researchers looked at user data such as age, family size, education level, and ZIP code. In addition, the researchers predicted users’ political affiliations based on demographic and geographic factors used by the polling firm Gallup.
They found that users’ spending increased 50 percent between February 26 and March 11—the period when more people in the country were becoming aware of the virus’ severity—before declining in nearly every category except groceries. Not surprisingly, these patterns were most prominent in parts of the country where people were under stay-at-home orders. The researchers also found that families with children stockpiled more; men stockpiled less early in the crisis; and low-income individuals stockpiled less.
Political affiliation also affected spending behavior, although not in the way that researchers expected. Although Republicans were more likely to downplay the severity of the virus than Democrats, they were more likely to stockpile. The co-authors speculate that Republicans might have spent more because they were more likely to be older, have larger families, and have more money to spend.
These consumer spending patterns underscore the importance of governments allocating stimulus funding to low-income citizens, the co-authors argue. “Understanding how households across class, geography, and partisan affiliation respond in their spending to a pandemic can be a critical tool for elected officials and policymakers to properly mitigate the economic harm on households and small businesses,” notes Pagel.
“This is a very different sort of recession than previous recessions,” Baker says in an article published in KelloggInsight. “Where previous recessions have been characterized by a shortfall in demand, here it’s more of a shortfall in supply,” he adds. “If this goes on for months and people change their spending habits, this really has the potential to change the economic landscape for firms."