Did the Japanese government’s travel subsidy increase the number of hotel guests and infection during the COVID-19 pandemic?

Abstract

In July 2020, the Japanese government launched the “Go To Travel” campaign, providing subsidies for domestic travel, during the coronavirus disease (COVID-19) pandemic. While the campaign aimed to revitalize the declining tourism industry, concerns were raised about its potential to spread infection. Although the literature indicates that the campaign increased hotel reservations, its causal effects on infection are not well-known. Using a difference-in-differences framework, this paper examines whether the campaign increased the number of domestic hotel guests and caused the virus to spread. The results show that the campaign increased the number of domestic hotel guests, as travel was not a Giffen good even at the risk of contracting COVID-19. However, the campaign did not increase infection spread in Japan, as it did not increase the transient population in the downtown areas. Moreover, this study provides a comprehensive cost–benefit analysis of the campaign.