Household heterogeneity in the euro area since the onset of the Great Recession

Miguel Ampudia Fraile, Akmaral Pavlickova, Jiri Slacalek and Edgar Vogel

Journal of Policy Modeling, 2016, vol. 38, issue 1, 181-197

Abstract: We propose a simple and transparent tool to extend household-level data from the Household Finance and Consumption Survey using aggregate series and micro-simulations. We quantify shocks to wealth and financial pressure faced by various categories of households since the onset of the Great Recession. The shocks differ substantially across countries and across economic and socio-demographic characteristics. We find that the rising unemployment rate disproportionately affected the income-poor, while the declining asset prices more the income-rich. Although borrowers benefited from lower interest rates, debt service-income and debt-income ratios for poor households went up due to falling incomes. As a policy contribution we illustrate how our “pseudomicro data” can be used to assess the distributional impact of asset prices on consumption: the unprecedented declines in asset prices substantially contributed to the sluggish consumption growth driven by both rich and poor households. While the former were hit by large shocks to wealth, the latter also significantly cut their spending because of their high MPCs.

Keywords: Household heterogeneity; Financial pressure; Wealth effect; Great Recession; Household Finance and Consumption Survey (search for similar items in EconPapers)
JEL-codes: D12 D31 E21 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Working Paper: Household heterogeneity in the euro area since the onset of the great recession (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:38:y:2016:i:1:p:181-197

DOI: 10.1016/j.jpolmod.2015.09.001

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