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Does Job Insecurity Affect Household Consumption?

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  • Andrew Benito

    () (Banco de España)

Abstract

The paper confronts a key implication of the precautionary model of saving/consumption, using micro-data on British households. The results provide support for the key proposition that job insecurity affects consumption. A one standard deviation increase in unemployment risk for the head of household is estimated to reduce consumption by 2.7 per cent. This effect is greater for the young, those without non-labour income and manual workers—for whom precautionary effects might be expected to be stronger a priori. Consumer durables purchases are also found to be inversely related to unemployment risk.

Suggested Citation

  • Andrew Benito, 2002. "Does Job Insecurity Affect Household Consumption?," Working Papers 0225, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:0225
    as

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/02/Fic/dt0225e.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Consumption; precautionary saving; job insecurity;

    JEL classification:

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

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