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

2019; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.3444528

1556-5068

Sarah Kroeger, Chad Cotti,

Global Health Care Issues

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.