The Household Response to the Mexican Peso Crisis

David McKenzie

Working Papers from Stanford University, Department of Economics

Abstract: November 2001

Household expenditure surveys are used to examine the effects of the Mexican peso crisis on household consumption and employment. The crisis is seen to have caused income and consumption to decline for all groups of society, although the relative impact differed by the education, industry and residence of the household head. The main smoothing mechanism was a change in the composition of consumption. Households are shown to have increased their expenditure share on certain food items even more than Engel’s law would predict, reducing their expenditure on luxury goods in order to do so. Labour supply is not found to have responded strongly to the crisis.

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Date: 2001-11
New Economics Papers: this item is included in nep-lam
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