Munich Personal RePEc Archive

COVID Government-Aid Programs and Wealth Creation

Van, Germinal and Barbosa Valdiosera, Emilio (2021): COVID Government-Aid Programs and Wealth Creation.

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The purpose of this study is to investigate the impact of COVID government-aid programs on wealth creation. When the pandemic spread to the US, the economy shut down. The lockdown compelled state governments across the United States to enforce shelter-in-place policies. As a result, unemployment surged, and many government-aid programs were created to help working-class families survive through the lockdown since the economy was at a standstill. Those whose political leanings favor the Democratic Party and Progressive Movements have argued that the COVID government-aid programs contributed to creating wealth, increased GDP growth, and increased the consumers’ income and consumption. Those more sympathetic to the Free-Market view argue that these relief programs did not contribute much to the creation of wealth but only increased government spending. In testing this hypothesis, to whether know if COVID government-aid programs contributed or not to the creation of wealth, we found that the impact of these programs on wealth creation was statistically significant but only a weak percentage of the variation of these COVID government programs could explain the variation in wealth creation, which lead us to infer that the impact of COVID government-aid programs only had a very minor role in the creation of wealth. We, therefore, concluded that the COVID government-aid programs did contribute more to guarantee a safety net for the working-class rather than creating wealth from which everyone could benefit.

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