Home About Latest Browse RSS Advanced Search

Board of Governors of the Federal Reserve System (U.S.)
Finance and Economics Discussion Series
Heterogeneity in Economic Shocks and Household Spending
Sebastian Devlin-Foltz
John Sabelhaus
Abstract

Large swings in aggregate household-sector spending, especially for big ticket items such as cars and housing, have been a dominant feature of the macroeconomic landscape in the past two decades. Income and wealth inequality increased over the same period, leading some to suggest the two phenomena are interconnected. Indeed, there is supporting evidence for the idea that heterogeneity in economic shocks and spending are connected, most notably in studies using local-area geography as the unit of analysis. The Survey of Consumer Finances (SCF) provides a household-level perspective on changes in wealth, income, and spending across different types of families. The SCF confirms that inequality is indeed increasing in recent decades, and the data provide support for the proposition that shocks to income and wealth are indeed related to large swings in spending across and within birth cohorts. However, the economic shocks associated with the Great Recession and changes in spending and debt to income ratios are widespread, and inconsistent with a narrow focus on the experiences and changes in behavior of particular (especially low- and modest-income) households.


Download Full text
Download http://dx.doi.org/10.17016/FEDS.2015.049
Cite this item
Sebastian Devlin-Foltz & John Sabelhaus, Heterogeneity in Economic Shocks and Household Spending, Board of Governors of the Federal Reserve System (U.S.), Finance and Economics Discussion Series 2015-49, 26 Jun 2015.
More from this series
JEL Classification:
Subject headings:
Keywords: Consumption; lifecycle; synthetic cohort
For corrections, contact Franz Osorio ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal