Wealth shocks, unemployment shocks and consumption in the wake of the Great Recession

  • We use data from the 2009 Internet Survey of the Health and Retirement Study to examine the consumption impact of wealth shocks and unemployment during the Great Recession in the US. We find that many households experienced large capital losses in housing and in their financial portfolios, and that a non-trivial fraction of respondents have lost their job. As a consequence of these shocks, many households reduced substantially their expenditures. We estimate that the marginal propensities to consume with respect to housing and financial wealth are 1 and 3.3 percentage points, respectively. In addition, those who became unemployed reduced spending by 10 percent. We also distinguish the effect of perceived transitory and permanent wealth shocks, splitting the sample between households who think that the stock market is likely to recover in a year’s time, and those who do not. In line with the predictions of standard models of intertemporal choice, we find that the latter group adjusted much more than the former its spending in response to financial wealth shocks.

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Metadaten
Author:Dimitris Christelis, Dimitris Georgarakos, Tullio JappelliORCiDGND
URN:urn:nbn:de:hebis:30:3-350919
URL:http://ssrn.com/abstract=2506073
DOI:https://doi.org/10.2139/ssrn.2506073
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 471
Series (Serial Number):CFS working paper series (471)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Language:English
Year of Completion:2014
Year of first Publication:2014
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2014/10/20
Tag:Consumption; Great Recession; Unemployment; Wealth Shocks
Issue:October 2014
HeBIS-PPN:351156127
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht