Unemployment Risk and Precautionary Wealth: Evidence from Households' Balance Sheets

Carroll, Christopher D.; Dynan, Karen E.; Krane, Spencer

doi:10.1162/003465303322369740

Cited by 206 publications

(183 citation statements)

References 31 publications

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“…For instance, Aguiar and Hurst (2005) found that food expenditure fell by about 9% in US households in which the breadwinner became unemployed; Carroll et al (2003) reported that food expenditure sensitivity to unemployment depended on the household's precautionary savings; and Stephens (2004) and Benito (2006), in examining how variations in subjective job-loss probabilities affected household consumption decisions, found that there was no impact on consumption by employed workers.…”

Section: Introductionmentioning

confidence: 99%

Economic crisis and the unemployment effect on household food expenditure: The case of Spain

2017

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This paper examines the unemployment effect on food expenditure (UEFE) for Spanish households and quantifies its magnitude in boom and crisis periods. The results show that the UEFE was negative in both contexts but was reinforced during the economic crisis. Applying propensity score matching and difference-in-differences techniques to a sample of Spanish households for 2006 and 2013 (representative of a boom period and a crisis period, respectively), we found that the UEFE amounted to 2.9% in the boom period and to 4.5% in the crisis period. Quantile difference-in-differences estimates confirmed that the economic crisis enhanced the UEFE for Spanish households, with this effect decreasing continuously up to quantile 0.9. The UEFE was exacerbated mainly in those economically disadvantaged households.

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Section: Introductionmentioning

confidence: 99%

Economic crisis and the unemployment effect on household food expenditure: The case of Spain

2017

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“…4 The usual empirical test is to correlate consumption or savings with some measure of risk. Researchers have used cross-sectional variations either in realized income risk across occupations (Skinner 1988, Carroll and Samwick, 1997, 1998 or geographic regions (Carroll, Dynan and Krane, 2003) or in subjective risk expectations (Guiso, Jappelli, andTerlizzese 1992 andLusardi 1997). 5 Giavazzi and McMahon (2012) is the only recent paper we know of to study the effect of policy uncertainty on households' savings and labor supply responses.…”

Section: Introductionmentioning

confidence: 99%

Political uncertainty and household savings

Aaberge

Liu

Zhu

2017

Journal of Comparative Economics

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Despite macroeconomic evidence pointing to a negative aggregate consumption response due to political uncertainty, few papers have used microeconomic panel data to analyze how households adjust their consumption after an uncertainty shock. We study household savings and expenditure adjustment from an unexpected, large-scale and rapidly evolving political shock that occurred largely in May 1989 in Beijing, China. Using monthly micro panel data, we present evidence that a surge in political uncertainty resulted in significant temporary increases in savings among urban households in China. Households responded mainly by reducing semi-durable expenditure and frequency of major durable adjustment. The uncertainty effect is more pronounced among older, wealthier, and more socially advantaged households. We interpret our findings using existing models of precautionary behavior. By focusing on time variation in uncertainty, our identification strategy avoids many of the potential problems in empirical studies of precautionary savings such as self-selection and life-cycle effects.

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“…Feelings of employment insecurity have been found to generate anxiety and substantially lower the well-being of workers and their dependents, to inhibit consumer spending, and to reduce wage growth (Wichert, 2002;Benito, 2004;Lusardi, 1998;Carroll et al, 2003;Campbell et al, 2007). This large impact of insecurity on well-being is thought to account in part for the highly detrimental effects of aggregate unemployment on the average well-being of populations (Di Tella et al, 2003).…”

Section: Introductionmentioning

confidence: 99%

Fears and realisations of employment insecurity

Dickerson

Green²

2012

Labour Economics

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Abstract:We investigate the validity of subjective data on expectations of job loss and on the probability of re-employment consequent on job loss, by examining associations between expectations and realisations. We find that subjective expectations data reveal private information about subsequent realisations of both job loss and of subsequent re-employment.As predictors of subsequent job loss, the expectations data perform better with numerical descriptors than with ordinal verbal descriptors. On average, employees overestimate the chance of losing their job; while they underestimate the difficulty of finding another job as good as the currently-held one. We recommend that survey items on employment insecurity should be explicit about each risk under investigation, and utilise a cardinal probability scale with discrete numerical descriptors.

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Unemployment Risk and Precautionary Wealth: Evidence from Households' Balance Sheets

Cited by 206 publications

References 31 publications

Economic crisis and the unemployment effect on household food expenditure: The case of Spain

Economic crisis and the unemployment effect on household food expenditure: The case of Spain

Political uncertainty and household savings

Fears and realisations of employment insecurity

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