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Household consumption through recent recessions

Listed author(s):
  • Thomas Crossley

    ()

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

  • Hamish Low

    ()

    (Institute for Fiscal Studies and Trinity College, Cambridge)

  • Cormac O'Dea

    ()

    (Institute for Fiscal Studies)

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://www.ifs.org.uk/wps/wp1118.pdf
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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W11/18.

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Date of creation: 19 Oct 2011
Handle: RePEc:ifs:ifsewp:11/18
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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, vol. 4(8), pages 37-43, August.
  2. N/A, 2009. "On the Recession," Local Economy, London South Bank University, vol. 24(3), pages 253-253, May.
  3. 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.
  4. 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.
  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. Allan Layton & Anirvan Banerji, 2003. "What is a recession?: A reprise," Applied Economics, Taylor & Francis Journals, vol. 35(16), pages 1789-1797.
  7. 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.
  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.
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