Two competing explanations of the UK consumer boom in the late 1980s are the financial liberalisation-imperfect housing market hypothesis of Muellbauer and Murphy and the expectations hypothesis of King. We use 15 years of Family Expenditure Surveys, and cohort analysis, to investigate to what extent these two hypotheses agree with observed changes in consumption patterns. We find that the housing markets explanation accounts for much of the increase by older cohorts, but cannot be reconciled with the marked rise in expenditure levels of younger households. A simple simulation exercise shows instead that the expectations hypothesis can generate increases of expenditure by young consumers of the magnitude observed in our data.
Authors
![Orazio Attanasio](/sites/default/files/styles/square_desktop/public/2022-06/Orazio_Attanasio.jpg?itok=Anbs4JXx)
Research Fellow
Orazio is an International Research Fellow at the IFS, a Professor at Yale and a Research Associate at the National Bureau of Economic Research.
![Guglielmo Weber](/sites/default/files/styles/square_desktop/public/2022-07/Guglielmo%20Weber.jpg?itok=nqNwcCi-)
Research Associate University of Padua
Guglielmo is a Research Associate at the IFS and Professor in the Department of Economics at the Faculty of Statistics, Padua University.
Journal article details
- Publisher
- Blackwell
- Issue
- November 1994
Suggested citation
Attanasio, O and Weber, G. (1994). 'The UK Consumption Boom of the Late 1980s: Aggregate Implications of Microeconomic Evidence' (1994)
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