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Author: | Browning, M. Crossley, T.F. |
Title: | Shocks, stocks, and socks: Smoothing consumption over a temporary income loss |
Journal: | Journal of the European Economic Association
2009 : DEC, VOL. 7:6, p. 1169-1192 |
Index terms: | household economics expenditure unemployment unemployment insurance |
Language: | eng |
Abstract: | This article examines how households in temporarily strained circumstances due to an unemployment spell cut back on expenditures and how they spend the marginal dollars of unemployment insurance (UI) benefit. It is emphasized that households buy durable and non-durable goods. In the short run households can cut back significantly on total expenditures without a significant fall in welfare if they concentrate their budget reductions on durables. An empirical analysis based on a Canadian survey of workers who experienced a job separation is presented. The study reveals that cuts in UI benefits lead to reduction in total expenditure with a stronger impact on clothing than on food expenditures. The effects this study finds are particularly strong for households with no liquid assets before the spell started. |
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