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Household consumption through recent recessions

  • Thomas Crossley

    ()

    (Institute for Fiscal Studies and University of Cambridge)

  • 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. The 'Great Recession' has been different from those that occurred in the 1980s and 1990s. It has been both deeper and longer, but also the composition of the cutbacks in consumption expenditures differs, with a greater reliance on cuts to non durable expenditure than was seen in previous recessions, and the distributional pattern across individuals differs. The young have cut back expenditure more than the old, as have mortgage holders compared to renters. By contrast, the impact of the recession has been similar across education groups. 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 increase durable purchases.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W12/13.

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Date of creation: Aug 2012
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Handle: RePEc:ifs:ifsewp:12/13
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