Consumption Smoothing: Financial Stress and Food Insecurity

Abstract

We link consumer credit bureau data to data on household demographics and consumption choices. We show that financial stress not only changes how and where consumers shop, but also affects the types and quality of food they buy. Consumers exhibit a dramatic shift toward purchasing cheap, high-calorie foods during times of high financial stress, which we interpret as a manifestation of food insecurity. Households with children are especially sensitive and respond more sharply to financial stress. Our results offer policy implications for targeted interventions.

Keywords: Financial Stress, Consumption, Personal Finance, Food Insecurity

JEL Classification: D1, L81, I1, I31