Seminar 31 October 2014

Consumption smoothing over the Great Recession

Abstract

Over the Great Recession households cut back substantially on food expenditure; we show that, despite this, calories and nutritional quality remained remarkably smooth. We set out a model in which households can adjust shopping effort and the characteristics of their shopping baskets in response to economic shocks. We use this framework along with detailed longitudinal data on households’ grocery purchases to study how households smoothed their consumption over this period. We find that households adjusted the characteristics of their shopping baskets and spent more time searching out better deals in order to achieve a basket of comparable size and nutritional quality to that bought before the recession.
 
Contact: Battista Severgnini and Cédric Schneider