Consumer uncertainty and time use
In this paper, Cacciatore et al. discuss the effects of economic uncertainty on consumers’ time use and discuss the macroeconomic implications. They use data from the American Time Use Survey to infer quarterly cyclical variation in home production and leisure time and estimate their response to an increase in uncertainty. In addition, they embed a benchmark housework model in an otherwise standard business cycle model that features both first- and second-moment shocks. Some of their results include:
- Higher uncertainty increases housework and reduces market hours worked, with modest effects on leisure.
- Consumers reallocate market hours to home production to insure against consumption risk, by compensating for a given shortfall in market expenditures with home-produced goods. This substitution makes housework an effective self-insurance tool when shocks to labor income materialize.
- The reallocation towards housework explains about one-third of the decline in aggregate output. In addition to weakening precautionary motives, time reallocation also lowers aggregate demand by inducing complementarity between market hours worked and consumption expenditures.
Time Use and Macroeconomic Uncertainty
Authors: Matteo Cacciatore, Stefano Gnocchi, Daniela Hauser
From: HEC Montréal, Bank of Canada
Consumers’ views about uncertainty and their impact on the economy
In this paper Gambetti et al. identify two drivers of consumer uncertainty: a) the variance of the economic shock which increases uncertainty and reduces agents’ disagreement (agreed uncertainty) and b) the variance of the information dispersion which increases both uncertainty and disagreement (disagreed uncertainty). The authors use data from the Michigan Survey of Consumers from 1978 to 2020 to measure consumers’ disagreement and find that consumer disagreement is pervasive and applies to current and future economic conditions. Interestingly, the dispersion of consumer views widens during economic expansions and diminishes during recessions, i.e. consumers disagree less strongly about current and future conditions when then economy is in a recession. The authors use these consumer patterns to understand the effects of agreed and disagreed uncertainty shocks on the macroeconomy. They develop a simple model with noisy and dispersed information that sheds light on the interplay between disagreement and uncertainty. In particular, in their model agents receive idiosyncratic signals about a fundamental shock and form forecasts about the path of the latter by solving a signal extraction problem. The authors show that disagreed uncertainty has no discernible economic effects and is benign for economic activity, but agreed uncertainty exerts significant depressing effects on a broad spectrum of macroeconomic indicators. They conclude:
The analysis implies that the disclosure of information that reduces disagreement may increase the adverse effect of uncertainty. A straightforward extension of our analysis is to study how policy announcements that convey information about the economy may result in lower disagreement and exacerbate the negative effect of uncertainty. It would be interesting to study whether a strategic diffusion of information that maintains a wide range of views could alleviate, or even overturn, the adverse effect of uncertainty.
Agreed and Disagreed Uncertainty
Authors: Luca Gambetti, Dimitris Korobilis, John D. Tsoukalas, Francesco Zanetti
From: Universitat Autònoma de Barcelona, Universitá di Torino, University of Glasgow, University of Oxford
