Consumption Smoothing under Labor Market Uncertainty: Do Household Characteristics Impact Saving?
35 Pages Posted: 10 Oct 2019 Last revised: 12 Oct 2019
Date Written: August 27, 2019
This study uses a household-level panel dataset to measure the ability of households to smooth consumption during periods of labor market uncertainty. We find a larger consumption response to both income and market uncertainty among households with moderately low levels of income and with female heads. While households are on average quite adept at smoothing consumption in response to both economic uncertainty and income fluctuations, we find evidence that not all consumption is forward looking: poverty is associated with myopic consumption and households above poverty display signs of credit constraints.
Keywords: Consumption Smoothing, Household Choice, Uncertainty
JEL Classification: D12, D14, E21, E32
Suggested Citation: Suggested Citation