Life Cycle Consumption and the Great Recession

Using Italian Household Budget Survey data for the period 1997-2013, this paper estimates the life cycle profiles of consumption and cross-sectional variance in the Great Recession. The study examines age profiles for total and durable expenditure, and four subcomponents of non-durable expenditure. We document significant heterogeneity in the way the recession affects consumption and the variance within-cohorts. The crisis has entailed a fall in expenditure for the youngest cohorts, and a notable reduction of inequalities for the middle and oldest cohorts with some differences between high and low income elastic expenditure. We also found that socio-demographic factors account for a substantial heterogeneity in consumption behaviour during the recession across households and expenditure subcomponents.