Where to Go: The Japanese Government's Travel Subsidy during COVID-19

Abstract

Faced with the trade-off between prevention of the spread of the coronavirus disease 2019 (COVID-19) and recovery in economic activities, in July 2020, the Japanese government launched the "Go To Travel" campaign (a subsidy for domestic travel) to revitalize the moribund tourism industry. This study examines (1) whether the government subsidy drives individuals to travel, even at the risk of acquiring an infection, and (2) whether the government subsidy results in the spread of the infection. We utilize a difference-in-differences method by taking advantage of the fact that the government subsidy excludes travel to and from Tokyo in the period spanning July 2020 through September 2020. We provide empirical evidence in favor of the successful effects of the government subsidy, suggesting that the government subsidy increases the number of hotel guests without spreading the infection. More hotel guests travel to other prefectures for sightseeing and travel within their own prefectures for reasons other than sightseeing.