IDEAS home Printed from https://ideas.repec.org/a/spr/joevec/v34y2024i1d10.1007_s00191-024-00853-x.html
   My bibliography  Save this article

Heterogeneity in household consumption behavior: The role of inequality and financial instability

Author

Listed:
  • Juan Laborda

    (Universidad Politécnica de Madrid)

  • Cristina Suárez

    (Universidad de Alcalá)

Abstract

We analyze, using the micro data of the Household Financial Survey (HFS) of the Bank of Spain, the consumption consequences of the household balance sheets and debt accumulation during the real estate bubble of 2002–2005, the Great Recession (2008–2011) and the subsequent economic recovery phase (2014–2017). Using quantile regression models, we find heterogeneity in household consumption behavior with respect to income and net worth levels, and in response to changes in household net worth in the last two periods. During the considered real estate bubble period, this heterogeneity in behavior is diminished, and only occurs in relation to the level of net wealth, in line with Hyman Minsky’s Paradox of Tranquility. These findings favor the post-Keynesian theory on consumption. The greater inequality leads to a higher propensity of certain households to consume in response to changes in housing and financial net worth. This is compatible with the relative income hypothesis extended in expenditure cascades models. Otherwise, households will be willing to take on more risk during economic boom periods associated with a real estate bubble, which translates into debt-financed consumption that virtually makes such heterogeneity practically disappear.

Suggested Citation

  • Juan Laborda & Cristina Suárez, 2024. "Heterogeneity in household consumption behavior: The role of inequality and financial instability," Journal of Evolutionary Economics, Springer, vol. 34(1), pages 63-88, January.
    • Handle: RePEc:spr:joevec:v:34:y:2024:i:1:d:10.1007_s00191-024-00853-x
    DOI: 10.1007/s00191-024-00853-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00191-024-00853-x
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00191-024-00853-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Consumption; Household debt; Inequality; Financial instability; Great Recession; Quantile regression models;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joevec:v:34:y:2024:i:1:d:10.1007_s00191-024-00853-x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.