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

Abstract

Faced with the trade-off between preventing the spread of the coronavirus disease (COVID-19) and promoting economic recovery, in July 2020, the Japanese government launched the "Go To Travel" campaign (a subsidy for domestic travel) to revitalize its moribund tourism industry. This study examines (1) whether government subsidies have driven individuals to travel, even at the risk of acquiring the infection, and (2) whether government subsidies have caused the virus to spread. We demonstrate that government subsidies have increased the number of domestic hotel guests who travel outside their prefectures and economic zones for sightseeing purposes. Additionally, it has also increased the number of hotel guests for business purposes, although remote work is encouraged and prevalent during the pandemic. Despite increased domestic travel, we find no evidence to support the view that government subsidies have resulted in the spread of the infection.

Keywords: COVID-19, government subsidy, travel

JEL Classification: H24, I18, L83, Z38