Consumption changes due to expected future income as a result of Covid-19

University essay from Göteborgs universitet/Institutionen för nationalekonomi med statistik

Abstract: This thesis aims to investigate the effects of the pandemic on individuals’ expectations regarding future income and thus their consumption behavior. The research will therefore contribute with new insights into the relationship between consumer behaviour and income expectations, which can be useful for future studies and for policy design during this or future pandemics. To analyse the consumption changes due to expected future income as a result of the pandemic, a web survey was sent to the mailing list of the School of Business, Economics and Law at the University of Gothenburg. Consequently, the sample mainly consists of Swedish students at a mean age of 25 years old. The data was later used in various ordered probit regressions to analyse the variables of interest. The results have shown that an employee’s expected future income is not only dependent on how their income has been affected as a result of Covid-19, but also if they are at risk of losing their job. When testing what economic factors affect a student expected future income, none of the included variables were significant, which can be due to the sample not being adequately sized. It was also found that change in consumption is generally associated with expected future income. In conclusion, the analysis has given us an important insight on how Covid-19 has affected future income expectations and thereby consumption. This can be beneficial when predicting the effects future pandemics, hence introducing more suited policies that can reduce the negative effect on the economy.

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