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Household Consumption through Recent Recessions

Author

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

Abstract

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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Suggested Citation

  • Thomas F. Crossley & Hamish Low & Cormac O'Dea, 2013. "Household Consumption through Recent Recessions," Fiscal Studies, Institute for Fiscal Studies, vol. 34(2), pages 203-229, June.
  • Handle: RePEc:ifs:fistud:v:34:y:2013:i::p:203-229 DOI: j.1475-5890.2013.12003.x
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    File URL: http://hdl.handle.net/10.1111/j.1475-5890.2013.12003.x
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    References listed on IDEAS

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    1. Paul Gregg & Jonathan Wadsworth, 2010. "Employment in the 2008–2009 recession," Economic & Labour Market Review, Palgrave Macmillan;Office for National Statistics, pages 37-43.
    2. 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.
    3. N/A, 2009. "On the Recession," Local Economy, London South Bank University, pages 253-253.
    4. 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.
    5. Martin Browning & Thomas F. Crossley, 2009. "Shocks, Stocks, and Socks: Smoothing Consumption Over a Temporary Income Loss," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1169-1192, December.
    6. Richard Blundell, 2009. "Assessing the Temporary VAT Cut Policy in the UK," Fiscal Studies, Institute for Fiscal Studies, pages 31-38.
    7. Allan Layton & Anirvan Banerji, 2003. "What is a recession?: A reprise," Applied Economics, Taylor & Francis Journals, vol. 35(16), pages 1789-1797.
    8. Mark Aguiar & Erik Hurst, 2005. "Consumption versus Expenditure," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 919-948, October.
    9. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Richard Blundell, 2016. "Coase Lecture—Human Capital, Inequality and Tax Reform: Recent Past and Future Prospects," Economica, London School of Economics and Political Science, vol. 83(330), pages 201-218, April.
    2. Apergis, Nicholas, 2015. "Financial portfolio choice: Do business cycle regimes matter? Panel evidence from international household surveys," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 34(C), pages 14-27.
    3. Petar Sorić & Ivana Lolić & Mirjana Čižmešija, 2016. "European economic sentiment indicator: an empirical reappraisal," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(5), pages 2025-2054, September.
    4. Petr Janský, 2014. "Consumer Demand System Estimation and Value Added Tax Reforms in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(3), pages 246-273, June.
    5. Anita Ratcliffe & Karl Taylor, 2013. "Who Cares about Stock Market Booms and Busts? Evidence from Data on Mental Wellbeing," Working Papers 2012021, The University of Sheffield, Department of Economics.
    6. Rachel Griffith & Martin O'Connell & Kate Smith, 2016. "Shopping Around: How Households Adjusted Food Spending Over the Great Recession," Economica, London School of Economics and Political Science, vol. 83(330), pages 247-280, April.
    7. repec:spr:soinre:v:134:y:2017:i:2:d:10.1007_s11205-016-1441-z is not listed on IDEAS
    8. Merike Kukk, 2014. "Distinguishing the Components of Household Financial Wealth: the Impact of Liabilities on Assets in Euro Area Countries," Proceedings of International Academic Conferences 0100418, International Institute of Social and Economic Sciences.
    9. Thomas Crossley & Hamish Low & Cath Sleeman, 2014. "Using a temporary indirect tax cut as a fiscal stimulus: evidence from the UK," IFS Working Papers W14/16, Institute for Fiscal Studies.
    10. repec:bla:econom:v:84:y:2017:i:333:p:34-53 is not listed on IDEAS
    11. Rachel Griffith & Martin O'Connell & Kate Smith, 2017. "The Importance of Product Reformulation Versus Consumer Choice in Improving Diet Quality," Economica, London School of Economics and Political Science, vol. 84(333), pages 34-53, January.

    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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