The impact of measured income uncertainty on Spanish household consumption at the end of the Great Recession

Alba Lugilde ()
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Alba Lugilde: University of Santiago de Compostela

Empirica, 2024, vol. 51, issue 3, No 4, 679-702

Abstract: Abstract The aim of this paper is to study empirically the existence of precautionary saving in Spain at the end of the Great Recession using the micro data provided by the Spanish Survey of Household Finances. Using the panel component of these data, I construct a measure of income uncertainty for each household from the observed household real income and use it to test for the strength of precautionary saving. I find that an increase of 1% in the standard deviation of income reduces household consumption by 8.8% when using the logarithm of the household consumption as dependent variable; however, when using the ratio between consumption and average income as dependent variable, given the average normal income and consumption in the sample, consumption will decrease by 8.1%.

Keywords: Income uncertainty; Precautionary saving; Panel data; Survey of Household Finances; Great Recession (search for similar items in EconPapers)
JEL-codes: D12 D14 D15 D81 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10663-024-09619-x

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