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Does Economic Insecurity Reduce all Types of Expenditures?

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  • Lepinteur, Anthony
  • Yin, Rémi

Abstract

The prudence theory predicts that economic insecurity reduces all consumption expenditures. We question this prediction by estimating the effect of economic insecurity on various expenditure items using an Australian longitudinal data set (HILDA) and panel regressions. Our results confirm that total consumption declines in response to greater economic insecurity and that this decline is greater for those with high risk aversion. However, we observe a clear gradient related to the degree of necessity of goods and services: the more necessary the consumption items, the weaker the effect of insecurity.

Suggested Citation

  • Lepinteur, Anthony & Yin, Rémi, 2022. "Does Economic Insecurity Reduce all Types of Expenditures?," GLO Discussion Paper Series 1060, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:1060
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    References listed on IDEAS

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    Cited by:

    1. Olga Cantó & Carmelo García Pérez & Marina Romaguera de la Cruz, 2023. "The Role of Tax-Benefit Systems in Shaping Economic Insecurity in the European Union," Hacienda Pública Española / Review of Public Economics, IEF, vol. 247(4), pages 7-36, December.

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    More about this item

    Keywords

    Household expenditures; Economic insecurity; Prudence;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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