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Household Consumption Through Recent Recessions

  • Thomas F. Crossley

    (Koç University , University of Cambridge and Institute for Fiscal Studies)

  • Hamish Low

    (University of Cambridge and Institute for Fiscal Studies)

  • Cormac O’Dea


    (Institute for Fiscal Studies and University College London)

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 expenditure differs, with a greater reliance on cuts to nondurable 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 mortage 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 Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 1132.

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Length: 27 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:koc:wpaper:1132
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  1. Martin Browning & Thomas F. Crossley, 2004. "Shocks, stocks and socks: smoothing consumption over a temporary income loss," CAM Working Papers 2004-05, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  2. Paul Gregg & Jonathan Wadsworth, 2010. "Employment in the 2008–2009 recession," Economic and Labour Market Review, Palgrave Macmillan, vol. 4(8), pages 37-43, August.
  3. Allan P. Layton & Anirvan Banerji, 2001. "What Is A Recession?: A Reprise," School of Economics and Finance Discussion Papers and Working Papers Series 095, School of Economics and Finance, Queensland University of Technology.
  4. repec:ese:iserwp:2012-05 is not listed on IDEAS
  5. 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.
  6. Mark Aguiar & Erik Hurst, 2005. "Consumption versus Expenditure," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 919-948, October.
  7. 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.
  8. 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.
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