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Household consumption through recent recessions

Author

Listed:
  • Thomas Crossley

    (Institute for Fiscal Studies and University of Essex and European University Institute)

  • Hamish Low

    (Institute for Fiscal Studies and University of Oxford & Nuffield College)

  • Cormac O'Dea

    (Institute for Fiscal Studies and Yale University)

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.

Suggested Citation

  • Thomas Crossley & Hamish Low & Cormac O'Dea, 2011. "Household consumption through recent recessions," IFS Working Papers W11/18, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:11/18
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    References listed on IDEAS

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    1. Graeme Chamberlin, 2010. "Output and expenditure in the last three UK recessions," Economic & Labour Market Review, Palgrave Macmillan;Office for National Statistics, vol. 4(8), pages 51-64, August.
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    8. 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.
    9. 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.
    10. 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.
    11. Allan Layton & Anirvan Banerji, 2003. "What is a recession?: A reprise," Applied Economics, Taylor & Francis Journals, vol. 35(16), pages 1789-1797.
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    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. Vesal, Mohammad, 2017. "Stimulus Effect of a Value-added Tax Cut: Evidence from the UK Tax Returns Data," MPRA Paper 101016, University Library of Munich, Germany.
    3. Renata Bottazzi & Serena Trucchi & Matthew Wakefield, 2013. "Wealth effects and the consumption of Italian households in the Great Recession," IFS Working Papers W13/21, Institute for Fiscal Studies.
    4. 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.
    5. 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.
    6. Ioannis Laliotis & Mujaheed Shaikh & Charitini Stavropoulou & Dimitrios Kourouklis, 2023. "Retirement and Household Expenditure in Turbulent Times," Journal of Family and Economic Issues, Springer, vol. 44(4), pages 968-989, December.
    7. Curl, Angela & Clark, Julie & Kearns, Ade, 2018. "Household car adoption and financial distress in deprived urban communities: A case of forced car ownership?," Transport Policy, Elsevier, vol. 65(C), pages 61-71.
    8. 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.
    9. Nikeel Nishkar Kumar & Arvind Patel & Navneel Shalendra Prasad & Shayal Nandani, 2023. "Loss aversion or hand-to-mouth behaviour in private consumption models," New Zealand Economic Papers, Taylor & Francis Journals, vol. 57(3), pages 247-259, September.
    10. Petar Sorić & Ivana Lolić & Mirjana Čižmešija, 2015. "European economic sentiment indicator: An empirical reappraisal," EFZG Working Papers Series 1505, Faculty of Economics and Business, University of Zagreb.
    11. 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.
    12. Filippa Bono & Maria Francesca Cracolici & Miranda Cuffaro, 2017. "A Hierarchical Model for Analysing Consumption Patterns in Italy Before and During the Great Recession," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 134(2), pages 421-436, November.
    13. Renata Bottazzi & Serena Trucchi & Matthew Wakefield, 2020. "Consumption Responses to a Large Shock to Financial Wealth: Evidence from Italy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(2), pages 762-789, April.
    14. 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.
    15. Alessandro Bucciol & Raffaele Miniaci, 2012. "Financial Risk Aversion, Economic Crises and Past Risk Perception," Working Papers 28/2012, University of Verona, Department of Economics.
    16. J. Magendans & J.M. Gutteling & S. Zebel, 2017. "Psychological determinants of financial buffer saving: the influence of financial risk tolerance and regulatory focus," Journal of Risk Research, Taylor & Francis Journals, vol. 20(8), pages 1076-1093, August.
    17. 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.
    18. 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.

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    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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