Income Risk and Car Replacement
Governments across the OECD area are implementing measures to stimulate consumption in order to counter the adverse effects of the economic crisis. Stimulus policies are (by construction) implemented when economic activity is slowing down. Recessions are for individual persons generally associated with increased uncertainty about future incomes, and this is likely to have dampening effect on spending, particularly spending on durables among which cars is the most prominent. The objective of this project is to answer the following question: How does income uncertainty influence car purchases?