Household Heterogeneity in the Euro Area Since the Onset of the Great Recession

42 Pages Posted: 5 Aug 2014

See all articles by Miguel Ampudia

Miguel Ampudia

Boston University - Department of Economics

Akmaral Pavlickova

European Central Bank (ECB)

Jiri Slacalek

European Central Bank (ECB)

Edgar Vogel

Deutsche Bundesbank; Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA)

Date Written: July 9, 2014

Abstract

We extend household-level data from the Household Finance and Consumption Survey using aggregate series and micro-simulations to investigate heterogeneity in the euro area. We quantify shocks to wealth, income and financial pressure faced by various categories of households since the onset of the Great Recession. The shocks differ substantially both across countries and across economic and socio-demographic characteristics. We find that the rising unemployment rate disproportionately affected the income-poor, while the declining wealth the income-rich. Although borrowers benefited from the substantial decrease in interest rates, debt service-income and debt-income ratios for poor households went up as they faced falling incomes. Household deleveraging was primarily driven by the restrained mortgage borrowing by the young. In several countries and at the euro-area level the unprecedented declines in asset prices substantially contributed to the sluggish consumption growth driven by both rich and poor households: while the former were hit by large shocks to wealth, the latter also significantly cut their spending because of their high MPCs.

Keywords: household heterogeneity, wealth, income, financial pressure, deleveraging, wealth effect, great recession, household finance and consumption survey

JEL Classification: D12, D31, E21

Suggested Citation

Ampudia, Miguel and Pavlickova, Akmaral and Slacalek, Jiri and Vogel, Edgar, Household Heterogeneity in the Euro Area Since the Onset of the Great Recession (July 9, 2014). ECB Working Paper No. 1705, Available at SSRN: https://ssrn.com/abstract=2464117

Miguel Ampudia (Contact Author)

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States

Akmaral Pavlickova

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Jiri Slacalek

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Edgar Vogel

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Strasse 14
Frankfurt am Main, 60431
Germany

HOME PAGE: http://www.bundesbank.de

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA) ( email )

Amalienstrasse 33
Munich, 80799
Germany

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