Fear of COVID-19 Contagion: The Idiosyncratic Effects of an Aggregate Pandemic Shock

Abstract

Using a survey on consumer expenditure in Japan, this study examines how the fear of COVID-19 contagion influences consumer expenditure patterns. We show that the consumption expenditure responses to the spread of the COVID-19 pandemic are significantly heterogeneous across generations. We find that the elderly spend less than the younger generation by at least 5% as COVID-19 spread. In fact, those aged above 60 significantly decreased their spending even on food and drink products by 13%. We also find that the elderly forgo shopping in favor of the younger generation. These heterogeneous responses are likely to be due to the fear of the COVID-19 infection. The finding suggests that heterogeneous perceptions regarding the fear of health-related consequences transforms an aggregate shock into an idiosyncratic one for any novel infectious disease.