Consumption Smoothing under Labor Market Uncertainty: Do Household Characteristics Impact Saving?

39 Pages Posted: 10 Oct 2019 Last revised: 14 May 2020

See all articles by Sarah Kroeger

Sarah Kroeger

University of Notre Dame

Chad D. Cotti

University of Wisconsin - Oshkosh

Date Written: May 11, 2020

Abstract

We examine the household consumption response to fluctuations in income and uncertainty, exploiting a large panel dataset that spans the period of the Great Recession. The results show that after controlling for changes in realized income, both household-specific income uncertainty and local labor market uncertainty depress consumption spending. We also find evidence of heterogeneity in consumption behavior, most notably an inverted U-shape response to income fluctuation and a greater vulnerability to labor market risk by male-only headed households and those with relatively intensive levels of occupation-specific human capital.

Keywords: Consumption Smoothing, Great Recession, Uncertainty

JEL Classification: D12, D14, E21, E32

Suggested Citation

Kroeger, Sarah and Cotti, Chad D., Consumption Smoothing under Labor Market Uncertainty: Do Household Characteristics Impact Saving? (May 11, 2020). Available at SSRN: https://ssrn.com/abstract=3444528 or http://dx.doi.org/10.2139/ssrn.3444528

Sarah Kroeger (Contact Author)

University of Notre Dame ( email )

3078 Jenkins and Nanovic Halls
Notre Dame, IN 46556-7000
United States
5746316317 (Phone)

Chad D. Cotti

University of Wisconsin - Oshkosh ( email )

800 Algoma Blvd
Oshkosh, WI WI 54901
United States

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