TY  - JOUR
AU  - Charles,Kerwin Kofi
AU  - Stephens,Melvin, Jr.
TI  - The Level and Composition of Consumption Over the Business Cycle: The Role of "Quasi-Fixed" Expenditures
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12388
PY  - 2006
Y2  - July 2006
UR  - http://www.nber.org/papers/w12388
L1  - http://www.nber.org/papers/w12388.pdf
N1  - Author contact info:
Kerwin Kofi Charles
Harris School of Public Policy
University of Chicago
1155 East 60th Street
Chicago, IL 60637
Tel: 773.834.8922
Fax: NA
E-Mail: kcharles@uchicago.edu

Melvin Stephens, Jr.
University of Michigan
Department of Economics
341 Lorch Hall
611 Tappan St.
Ann Arbor, MI 48109-1220
Tel: 734/647-5606
E-Mail: mstep@umich.edu
M2  - featured in NBER digest on 2006-07-31
AB  - We study how the level and composition of household expenditures changes over the business cycle for households at different positions in the income distribution. Using data from the Consumer Expenditure Survey, we find that transitory, state-specific increases in unemployment causes lower income groups to lower their total expenditure outlays, contrary to the prediction of the textbook account of consumption behavior. In addition, in bad economic times these groups raise the share of their total outlays devoted to relative fixed outlays like home or car payments. These adjustments are primarily concentrated among reductions in outlays devoted to entertainment and personal care expenditures. We find no similar effects for households at higher positions in the income distribution. It is difficult to attribute these differences across households to differences in credit constraints, both because the specific results for credit holdings are imprecisely estimated and because income losses experienced by higher SES households are so small that there is, for them, little need to adjust consumption.
ER  -