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- Title
How Economic Contractions and Expansions Affect Expenditure Patterns.
- Authors
KAMAKURA, WAGNER A.; YUXING DU, REX
- Abstract
In this study, we attempt to understand how household budget allocations across various expenditure categories change when the economy is in recession or expansion. The common assumption is that a household's tastes would not change as a function of economic conditions and therefore any adjustments in expenditure patterns during economic contractions/expansions would simply be due to changes in the consumption budget. Standard economic models translate these budgetary effects into lateral movements along a set of fixed Engel curves, which relate category expenditure shares to total expenditures. We propose and test a conceptual framework based on the notion of relative consumption, which prescribes that, for any given total consumption budget, expenditure shares for positional goods/services will decrease during a recession, while shares for nonpositional goods/services will increase (i.e., shifting the entire Engel curve upward or downward, depending on the nature of the expenditure category and the economic conditions).
- Subjects
CONSUMPTION (Economics); BUSINESS cycles; HOUSEHOLD budgets; RECESSIONS; ECONOMIC models; ECONOMIC expansion
- Publication
Journal of Consumer Research, 2013, pS92
- ISSN
0093-5301
- Publication type
Article
- DOI
10.1086/662611