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The impact of measured income uncertainty on Spanish household consumption at the end of the Great Recession

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  • Alba Lugilde

    (University of Santiago de Compostela)

Abstract

The aim of this paper is to study empirically the existence of precautionary saving in Spain at the end of the Great Recession using the micro data provided by the Spanish Survey of Household Finances. Using the panel component of these data, I construct a measure of income uncertainty for each household from the observed household real income and use it to test for the strength of precautionary saving. I find that an increase of 1% in the standard deviation of income reduces household consumption by 8.8% when using the logarithm of the household consumption as dependent variable; however, when using the ratio between consumption and average income as dependent variable, given the average normal income and consumption in the sample, consumption will decrease by 8.1%.

Suggested Citation

  • Alba Lugilde, 2024. "The impact of measured income uncertainty on Spanish household consumption at the end of the Great Recession," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(3), pages 679-702, August.
    • Handle: RePEc:kap:empiri:v:51:y:2024:i:3:d:10.1007_s10663-024-09619-x
    DOI: 10.1007/s10663-024-09619-x
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    More about this item

    Keywords

    Income uncertainty; Precautionary saving; Panel data; Survey of Household Finances; Great Recession;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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