A difference-in-differences analysis of the impact of government financial subsidies on mobile app usage: a natural experiment during COVID-19

Abstract

ABSTRACT This study examines the impact of financial subsidies provided by the Korean government to help people during economic crises or natural disasters such as the COVID-19 pandemic. To this end, we conduct a natural experiment by selecting two adjacent South Korean metropolitan regions, wherein only one received a local government subsidy. Additionally, we utilize Nielson panel data to track residents’ usage of two mobile app categories in these regions. To uncover the causal effect of the financial subsidy on mobile app usage, we develop a difference-in-differences (DiD) model, revealing that the subsidy increased mobile app usage for food delivery and medical service apps, and this increase was relatively steady for medical service apps. Furthermore, in response to the subsidy, low-income individuals used food delivery apps more than mid- and high-income individuals, while those with high incomes utilized medical service apps more than those with low incomes. This study presents important managerial implications for policymakers to alleviate the economic damage caused by natural disasters such as future recurrent pandemics.