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New Zealand Households and the 2008/09 Recession

  • Christopher Ball
  • Michael Ryan


    (The Treasury)

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    This paper seeks to quantify how the welfare of different types of household changed between 2006/07 and 2009/10; a period which included the 2008/09 recession. We use three measures of household welfare: income, expenditure and the equivalent variation metric. The equivalent variation is a measure of the welfare lost owing to price changes. Using household level data from the Household Economic Survey (HES), we allocate households into “types” on one dimension (for example age group) as is traditional in the literature but also cluster the data into 12 different representative households based on 9 demographic and economic dimensions. Households in low income groups, with children and/or who rent were particularly impacted by the recession in terms of welfare losses owing to price changes. However we find that those in low income groups had strong increases in expenditure; furthermore the welfare gains from this increased expenditure more than offset the welfare losses from the price changes.

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    Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 13/05.

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    Length: 39
    Date of creation: Apr 2013
    Date of revision:
    Handle: RePEc:nzt:nztwps:13/04
    Contact details of provider: Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
    Phone: +64-4-472 2733
    Fax: +64-4-473 0982
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    1. Brian McCulloch & Jane Frances, 2001. "Financing New Zealand Superannuation," Treasury Working Paper Series 01/20, New Zealand Treasury.
    2. Tony Makin, 1995. "Inflation distortion of the external accounts: the Australian example," Journal of Economic Studies, Emerald Group Publishing, vol. 22(1), pages 58-65, January.
    3. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
    4. Martin Browning & Annamaria Lusardi, 1995. "Household Saving: Micro Theories and Micro Facts," Department of Economics Working Papers 1995-02, McMaster University.
    5. Phil Briggs, 2012. "Financial accounts and flow of funds," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 75, pages 26-35, December.
    6. Martin Lettau & Sydney Ludvigson, 2003. "Understanding Trend and Cycle in Asset Values: Reevaluating the Wealth Effect on Consumption," NBER Working Papers 9848, National Bureau of Economic Research, Inc.
    7. Khoon Goh, 2005. "Savings and the household balance sheet," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 68, June.
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