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On the Effect of the Great Recession on US Household Expenditures for Entertainment

Author

Listed:
  • Liping Gao
  • Hyeongwoo Kim
  • Yaoqi Zhang

Abstract

This paper empirically investigates potential effects of economic recessions on consumers’ decision-making process for leisure activities using the Consumer Expenditure Survey (CES) data during the Great Recession. Recognizing the presence of a high degree of censoring, we employ the Tobit model to assess the income effect on recreational activities in order to avoid bias in the least squares estimator for the latent coefficients. Income coefficient estimates are significantly positive in all years we consider, confirming that leisure is a normal good. However, we observe statistically significant decreases in the income coefficient during recession years in two out of three categories of leisure activities. That is, the responsiveness of consumption to income changes decreases during recession years, which implies a sluggish adjustment in leisure expenditures when economic distress is elevated.

Suggested Citation

  • Liping Gao & Hyeongwoo Kim & Yaoqi Zhang, 2015. "On the Effect of the Great Recession on US Household Expenditures for Entertainment," Auburn Economics Working Paper Series auwp2015-06, Department of Economics, Auburn University.
    • Handle: RePEc:abn:wpaper:auwp2015-06
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    File URL: https://cla.auburn.edu/econwp/Archives/2015/2015-06.pdf
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    Cited by:

    1. Hyeongwoo Kim & Liping Gao, 2017. "Consumer Spending on Entertainment and the Great Recession," Auburn Economics Working Paper Series auwp2017-07, Department of Economics, Auburn University.

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    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • P46 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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