The effect of self-reported transitory income shocks on household spending
AbstractWe use repeated cross-sections of the Survey of Consumer Finances (SCF) to study the effect of self-reported transitory income shocks on household food spending. The self-reported shocks in the SCF are derived from survey questions about the gap between actual and "normal" income. This approach stands in contrast to existing income shock measures in the literature, which are generally derived from the residuals of estimated earnings or income equations. Although the self-reported transitory shocks could potentially give very different answers, the overall variance and asymmetry of shocks over the business cycle are similar to those of existing residual-based estimates. Engel Curve analysis shows a significant relationship between self-reported income shocks and household food spending, though the estimated spending responses are only a small part of the substantial slowdown in the growth rate of food consumption observed during the recent economic downturn.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2012-64.
Date of creation: 2012
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-20 (All new papers)
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