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On the structure of Italian households' consumption patterns during the recent crises
Abstract
This paper reviews the evolution of the Italian household consumption during the recent crises. I first provide a comparison between macro data, recovered from the National Accounts, and micro data, from the Household Budget Survey, and show that the main aggregates from the two sources behave in a similar way over time. I then inspect the typologies of households that most suffered from the recent economic crises and provide evidence of sizeable re-composition effects in their consumption patterns. Specifically, younger, and to a less extent older, households were most affected by the economic downturn; those middle aged, living in Northern regions, highly educated and owners of a house could instead easily cope with the recession.
... Specifically, empirical analyses on Italian data show that younger households and families where the householder is an occasional worker or employed in the tourism or construction sectors were the most affected by the consumption downfall. In contrast, households in the North and those where the householder is highly educated or a home owner have been better able to react to the economic crisis (Rondinelli 2014;Bernini et al. 2015). ...
The paper aims to explore how the Great Recession of the twenty-first century has impacted on the consumption behaviour of Italian households. Following a hierarchical approach, the study investigates differences in consumption behaviour at both household and regional levels. Using micro data on Italian Household Expenditure for the years 2002, 2006, 2010 and 2012, multilevel and two-step regression models have been estimated. The analysis has been performed for four different consumption categories: food, housing, work-related and leisure. The analysis reveals that the economic crisis led to increasing income elasticity for each category of consumption, especially for food, the most essential basic good. The crisis also created more marked regional disparities in the average level of expenditure.
I study the effectiveness of temporary cuts to consumption tax rates as fiscal stimulus instruments during recessions using a structural life‐cycle model with multiple consumption categories. I find tax elasticities of 0.4 for nondurable luxuries and of 10.5 for durables. I show that the tax cut on nondurables has an intratemporal substitution effect, whereas the tax cut on durables acts through an intertemporal substitution mechanism that is stronger for high‐income, liquidity‐unconstrained, and younger households. This mechanism is amplified in less persistent recessions and dampened in absence of recessions due to durables' partial irreversibility and precautionary saving motives.
We estimate marginal propensities to consume from wealth shocks. We exploit large asset‐price shocks in 2007‐2008 and household‐level panel data to implement instrumental variables. A euro fall in risky financial wealth resulted in cuts in annual total (non‐durable) consumption of 8.5‐9 (5.5‐5.7) cents, with small effects on food spending. Effects seem stronger for lower‐wealth or indebted households, but significant responses from wealthier households and those without mortgages are important for our baseline results. Counterfactuals indicate financial‐wealth effects were relatively important for consumption falls in 2007/08 Italy. The estimated effects are consistent with a simulated lifecycle model capturing the wealth shock.
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Italian Abstract: Il lavoro analizza le tendenze del mercato del credito al consumo durante la crisi usando i dati, di fonte CRIF, relativi alle domande di prestiti personali e finalizzati e ai contratti stipulati tra il 2007 e il 2013 in Italia (55 e 37 milioni rispettivamente). L’analisi mostra che il forte ridimensionamento dei consumi di beni durevoli si e associato a un calo della domanda di finanziamenti, con l’eccezione di quella per contratti di piccolo importo (English Abstract: The study analyses trends in the market for consumer credit during the crisis, relying on data by CRIF referring to demand for personal and special-purpose loans and to contracts signed between 2007 and 2013 in Italy (55 and 37 million respectively). The analysis shows how the sharp reduction in durable consumption has been associated with a decrease in demand for loans, with the exception of contracts for small amounts (
An analysis of a decline in the ratios of aggregate spending for various categories of expenditures from the BLS Consumer Expenditure Survey and the BEA's Personal Consumption Expenditures over an 11-year period employs a new methodology that takes into account the degree of comparability of those categories.
Previously, to fit an almost-ideal demand system in Stata, one would have to use the nlsur command and write a function evaluator program as described in [R] nlsur and Poi (2008, Stata Journal 8: 554-556). In this article, I introduce the command quaids, which obviates the need for any programming by the user. The command fits Deaton and Muellbauer's (1980b, American Economic Review 70: 312-326) original almost-ideal demand-system model as well as Banks, Blundell, and Lewbel's (1997, Review of Economics and Statistics 79: 527-539) quadratic variant. Demographic variables can also be included in the model. Postestimation tools calculate expenditure and price elasticities.
Hedonic methods are currently considered state-of-the-art for handling quality changes when compiling consumer price indices. The present article proposes first a mathematical description of characteristics and of elementary aggregates. In a following step, a hedonic econometric model is formulated and hedonic elementary population indices are defined. These indices extend from simple indices based on some average quality to universal formulae that incorporate the full quality spectrum of the respective elementary aggregate. We emphasise that population indices are unobservable economic parameters that need to be estimated by suitable sample indices. It is shown that most of the hedonic elementary index formulae used in practice are sample versions of particular hedonic elementary population indices.
This article provides an example illustrating how to use Stata to estimate systems of household demand equations. More generally,the techniques developed here can be used to estimate any system of nonlinear equations using Stata's maximum likelihood routines. Copyright 2002 by Stata Corporation.
Two commonly used sources of aggregate expenditure data are personal consumption expenditures in the National Income an d Product Accounts and the Consumer Expenditure Surveys administered by the Bureau of Labor Statistics. The author adjusts b oth data sources to incorporate the service flows from owner-occupied housing and other consumer durables. A comparison of the two estimat es of aggregate expenditure reveals that the differences between the tw o data sets have been growing over time. By 1989 the level of aggregat e expenditure in the national accounts exceeds that reported in the Consumer Expenditure Surveys by $1224 billions. Less than half of th is difference can be attributed to definitional differences in the two data sources. Copyright 1992 by MIT Press.
The nlsur command is better suited to demand-system estimation than the suite of ado-fifies provided in Poi (2002, Stata Journal 2: 403–410) because it is faster and requires only one ancillary ado-file. This article replicates the results presented in Poi (2002) by using nlsur instead of ml.
We introduce a new hybrid approach to joint estimation of Value at Risk (VaR) and Expected Shortfall (ES) for high quantiles of return distributions. We investigate the relative performance of VaR and ES models using daily returns for sixteen stock market indices (eight from developed and eight from emerging markets) prior to and during the 2008 financial crisis. In addition to widely used VaR and ES models, we also study the behavior of conditional and unconditional extreme value (EV) models to generate 99 percent confidence level estimates as well as developing a new loss function that relates tail losses to ES forecasts. Backtesting results show that only our proposed new hybrid and Extreme Value (EV)-based VaR models provide adequate protection in both developed and emerging markets, but that the hybrid approach does this at a significantly lower cost in capital reserves. In ES estimation the hybrid model yields the smallest error statistics surpassing even the EV models, especially in the developed markets.
Recent research has demonstrated that some households cut back on expenditures in an unemployment spell. Moreover, some of these households respond to variation in the transitory income provided by unemployment insurance benefits. This suggests that these households are constrained in the sense that they respond to variations in current income even if these do not have any permanent impact. In this paper we take up the question of how households in temporarily straitened circumstances cut back and how they spend marginal dollars of transfer income. Our theoretical and empirical analysis emphasises the importance of allowing for the fact that households buy durable as well as non-durable goods. The theoretical analysis shows that in the short run households can significantly cut back on total expenditures without a significant fall in welfare if they concentrate their budget reductions on durables. We present an empirical analysis based on a Canadian survey of workers who experienced a job separation. Exploiting changes in the unemployment insurance system over our sample period we show that cuts in UI benefits lead to reductions in total expenditure with a stronger impact on clothing than on food expenditures. These effects are particularly strong for households with no liquid assets and/or households in which the lost income was ‘important’ for the household.