5 Household income and expenditure
5.1 Metrics
As discussed in Section 2, the first two indicators we use to examine the welfare changes over the recession are household disposable income and expenditure on goods and services. Based on Statistics N.Z. (1996) we also allocate the expenditure categories (see Table A.3 in Appendix A) from HES into durable or non-durable expenditure. [20] We are interested in changes over the recession in durable expenditure for three reasons. First, many durables are long lived therefore it is possible to delay their replacement in the face of income or wealth loss. Second, the slowdown in the housing market means the so-called "housing furnishing" channel [21]will be slower. Third, some durables are likely to be funded by credit; Reserve Bank data showed at an aggregate level annual household debt growth was 1.0% in December 2011 compared to around 13% in 2007. Therefore the 2008/09 recession may have seen some households voluntarily deleverage and/or other households face an involuntary reduction in credit (owing to a tightening in bank lending standards and the collapse of small finance companies).
5.2 Results
We start with the results based on household types created by splitting the sample on hard dimensions. By contrasting our clustering results against the hard dimension results we are able to point out the advantages of using the clustering technique. All values reported in the tables are the weighted (by population weights) arithmetic mean values for the relevant group within each category.
Notes
- [20] Some are also classified as neither. This is because that expenditure category is a service or the expenditure category is a combination of durable/non-durable/service and it is therefore hard to allocate it into one of those groups. It is possible to break some of these durable/non-durable/service expenditure categories down further but this results in a large number of zero data points meaning any inference is likely to be questionable. This means the change in durable budget share plus change in non-durable budget share does not sum to zero.
- [21] Purchase of new housing goods when you move to a new house. Therefore lower turnover in the housing market means less of these purchases.
