The rise of e-commerce and generational consumption inequality: Evidence from COVID-19 in South Korea

Abstract

This paper investigates how the local COVID-19 outbreak, acting as a sudden negative shock to mobility and accessibility, led to a significant generational disparity, with younger people benefiting disproportionately from the ability to transition to online consumption. Employing credit card transaction data linked to cardholders’ demographic characteristics, we construct online spending shares by age group to study the generational disparity in online consumption when consumer mobility was constrained. We estimate a difference-in-difference model based on an exogenous regional outbreak of COVID-19 in South Korea. Our results show that when the mobility costs to offline stores unexpectedly increased due to the pandemic, middle-aged and older adults (aged 45 and above) were less likely to shift their spending online than younger adults (aged 20–44). The limited shift to the online consumption of older people resulted in decreases in their total consumption, while that of younger ones changed little, thereby increasing generational consumption inequality. With the rising trend in e-commerce, our findings emphasize the growing importance of generational differences in adapting to new shopping technologies.