Unemployment and household spending in rural and urban India: Evidence from panel data

We are delighted to invite you to the 7th Consumer Pyramids Research Seminar on 11 February 2021 at 6.00 PM IST.

Ms. Manavi Gupta and Dr. Avinash Kishore from IFPRI will present

Unemployment and household spending in rural and urban India: Evidence from panel data

You can sign up for the webinar here. Their paper will be discussed by Dr. Abhinav Narayanan from the Reserve Bank of India.

Abstract

India has recorded high levels of unemployment and low labor force participation rates in recent years even before the onset of the COVID-19 pandemic and the lockdown. How does an episode of unemployment or loss of income affect household consumption expenditure is an important question for designing effective safety nets. We use data on household-specific episodes of job loss and decline in income, from an earlier year (March-April 2019) to estimate the household response to employment shocks. We apply diff-in-diff and quantile regressions to a high-frequency panel data from a nationally representative survey of 1,75,000 households to estimate the impact of a job loss (and change in income) on household consumption expenditure - for urban and rural households, and households across different expenditure levels. We find that loss of employment of an earning member leads to a significant immediate decline in household consumption expenditure. The decline is much larger for urban households and households in the lowest and the highest deciles of monthly per capita. Durable expenses go down the most. Expenditure on health and education also goes down significantly and there is evidence of adjustments in discretionary expenses too, especially for urban households. For households with only one earning member, borrowing does not increase after the job loss, suggesting credit constraints. Government cash transfers help rural households, as the beneficiaries show a smaller reduction in consumption expenditure after the shock. Our findings highlight the high vulnerability of urban households to economic shocks and can inform the design and targeting of income support and other safety-net programs in India and other developing countries.

Format

- 6.00 to 7.00 PM: Paper presentation by Ms. Manavi Gupta

- 7.00 to 7.30 PM: Discussion followed by moderated Q&A

About the CPHS Research Seminar Series

The CPHS Research Seminar Series features work based on the Consumer Pyramids Household Survey. It is a platform for researchers to receive critical and technical feedback from accomplished peers. It is also meant to engage with the larger research community who may gain from technical discussions. You can find all previously presented work on the Events Section of our website. You can also view a recording of every seminar so far at the CPHS Research Seminar Playlist on our YouTube channel.

The Consumer Pyramids Household Survey is India’s largest regular household survey and the world’s largest household panel survey. CPHS has collected data on over 232,000 households and 1.19 million individuals surveyed since 2014. The survey collects information on household demographics, individual identities, employment, health status, financial inclusion, individual and household incomes, consumption expenditures, ownership of assets and intentions to buy them, household amenities and consumer sentiments. Income and expenses data are a monthly time-series since January 2014.

Record-level data from all 21 Waves of CPHS is available through a subscription service. Data from the Sep-Dec 2020 Wave of CPHS was released to subscribers on January 2, 2021. Please visit our website to learn more about CPHS and how to gain access to the record-level data.

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