Regional and Sectorial Impacts of the Covid-19 Crisis: Evidence from Electronic Payments

This paper uses novel and comprehensive data on electronic payments and cash withdrawals in Portugal to study the impact of the first wave of Covid-19 until August 2020. We employ a difference-in-differences event study with monthly data, by municipality and sector, between 2018 and 2020. We identify a massive causal impact of the lockdown on overall purchases. The year-on-year growth rate decreased by 16, 37, and 28 percentage points, respectively, between March and May. The impact is less severe subsequently, but in August it is still below pre-pandemic levels. We show that the crisis is concentrated on more central and more urban municipalities. The sign and magnitude of the impact varies considerably across sectors. We identify two effects that explain the crisis in different regions: the weight of each sector on the local economy, or composition effect, and the relative contraction rates of sectors in main cities vis-a-vis the overall country, or behavioral effect. We show that the two effects concur in the result that the crisis is stronger in main cities.