Regular versus lump-sum payments in union contracts and household consumption
Roberta Zizza () and
No 2013, Working Paper Series from European Central Bank
We use information on monthly wage increases set by collective agreements in Italy and exploit their variation across sectors and over time in order to examine how household consumption responds to different types of positive income shocks (regular tranches versus lump-sum payments). Focusing on single-earner households, we find evidence of consumption smoothing in accordance with the Permanent-Income Hypothesis, since total and food consumption do not exhibit excess sensitivity to anticipated regular payments. Consumption does not respond at the date of the announcement of income increases either, as these are known to compensate workers for the overall loss in their wages' purchasing power. However, consumption responds, albeit a little, to transitory and less anticipated one-off payments, as the expenditures on clothing & shoes increase upon the receipt of the lump-sum payments. This behaviour is consistent with bounded rationality as consumers do not consider the lump-sum as part of the overall wage inflation adjustment. JEL Classification: D12, E21, J51
Keywords: bounded rationality; consumption; permanent income hypothesis; union contracts (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Working Paper: Regular versus Lump-Sum Payments in Union Contracts and Household Consumption (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20172013
Access Statistics for this paper
More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().