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Household Consumption through Recent Recessions

  • Thomas F. Crossley
  • Hamish Low
  • Cormac O'Dea

This paper examines trends in household consumption and saving behaviour in each of the last three recessions in the UK. We identify several dimensions along which the most recent recession (the so-called 'Great Recession') has been different from those that occurred in the 1980s and 1990s. These include its depth and length as well as the composition of the cutbacks in expenditure - with a greater reliance on cuts to nondurable expenditure than was seen in previous recessions. We show that, both inside and outside recessions, the extent to which the growth in durable purchases is more volatile than growth in nondurable purchases has declined over the past 15 years. Finally, we present evidence that suggests that two aspects of fiscal policy in the UK in 2008 and 2009 - the temporary reduction in the rate of VAT and a car scrappage scheme - had some success in encouraging households to bring forward some durable purchases.

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File URL: http://hdl.handle.net/10.1111/j.1475-5890.2013.12003.x
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Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 34 (2013)
Issue (Month): 2 (06)
Pages: 203-229

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Handle: RePEc:ifs:fistud:v:34:y:2013:i::p:203-229
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  1. Paul Gregg & Jonathan Wadsworth, 2010. "Employment in the 2008–2009 recession," Economic and Labour Market Review, Palgrave Macmillan, vol. 4(8), pages 37-43, August.
  2. Allan P. Layton & Anirvan Banerji, 2001. "What Is A Recession?: A Reprise," School of Economics and Finance Discussion Papers and Working Papers Series 095, School of Economics and Finance, Queensland University of Technology.
  3. Martin Browning & Thomas F. Crossley, 2004. "Shocks, stocks and socks: smoothing consumption over a temporary income loss," CAM Working Papers 2004-05, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  4. Martin Browning & Thomas F. Crossley, 2000. "Luxuries Are Easier to Postpone: A Proof," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 1022-1026, October.
  5. Richard Blundell, 2009. "Assessing the Temporary VAT Cut Policy in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 30(1), pages 31-38, 03.
  6. Mark Aguiar & Erik Hurst, 2005. "Consumption versus Expenditure," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 919-948, October.
  7. Richard Blundell & Ben Etheridge, 2010. "Consumption, Income and Earnings Inequality in Britain," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 76-102, January.
  8. N/A, 2009. "On the Recession," Local Economy, London South Bank University, vol. 24(3), pages 253-253, May.
  9. Brewer, Mike & O'Dea, Cormac, 2012. "Measuring living standards with income and consumption: evidence from the UK," ISER Working Paper Series 2012-05, Institute for Social and Economic Research.
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